HJ 

srrt 
.cr 


UC-NRLF 


SB    ED 


LIBRARY 


UNIVERSITY  OF  CALIFORNIA. 


Gl  FT    OF 


- 


Class 


UNIFORM  MUNICIPAL 
ACCOUNTING 


Proceedings  of  a  Second  Con- 
ference Held  in  tHe  City  of 
'WasHington,  February  13  and 
1-4,  19OO  *  under  tHe  auspices 
of  tHe  United  States  Bureau  of 
tHe  Census  *  *  *  *  *  ^  * 


WASHINGTON 

Government  Printing  Office 
1900 


UNIFORM  MUNICIPAL 
ACCOUNTING 


UNIFORM   MUNICIPAL 
ACCOUNTING 


Proceedings  of  a  Second  Con- 
ference Held  in  tHe  City  of 
'Washington,  February  13  and 
1-4%  19OO  ^  under  tKe  auspices 
of  tHe  United  States  Bureau  of 
trie  Census  ^  ^  *  S*  *  *  * 


WASHINGTON 

Government  Printing  Office 
1900 


B-1D63 


(bulirnuurut  yriutiiui  (OtVtn- 


- 


CALL  FOR.  THE  CONFERENCE. 


On  January  17,  1906,  Director  S.  N.  D.  North,  Bureau  of  the 
Census,  Department  of  Commerce  and  Labor,  sent  out  the  following 
invitation  to  comptrollers,  auditors,  treasurers,  and  others  interested 
in  the  uniform  classification  of  municipal  accounts. 

DEPARTMENT  OF  COMMERCE  AND  LABOR, 

BUREAU  OF  THE  CENSUS, 
Washington,  D.  C.,  January  17, 1906. 

DEAR  SIR: 

I  take  pleasure  in  inviting  you  to  attend  the  second  conference  of  comptrollers,  auditors, 
treasurers,  and  others  interested  in  the  uniform  classification  of  municipal  accounts  and 
comparable  municipal  statistics,  to  be  held  on  February  13  and  14,  1906,  in  the  hall  of  the 
Arlington  Hotel,  Washington,  D.  C.  This  conference  is  called  at  the  request  of  the  com- 
mittee appointed  by  the  first  one,  which  was  held  in  Washington  in  November,  1903. 
Its  object  is  to  aid  and  promote  the  adoption  of  such  uniform  classification  of  accounts 
as  will  facilitate  comparisons  of  the  statistics  of  different  cities. 

The  excellent  results  of  the  first  conferenpe  are  partially  reflected  in  Bulletin  20,  issued 
by  the  Census  Bureau  some  months  ago,  containing  the  results  of  the  census  municipal 
investigation  for  the  fiscal  years  1902  and  1903.  A  similar  report  for  1904  is  now  in  prepa- 
ration. The  second  conference  is  called  prior  to  undertaking  the  report  for  1905,  in  the 
belief  that  it  will  lead  to  beneficial  results  both  for  the  cities  which  participate  and  for 
the  Census  Bureau. 

A  preliminary  programme  of  the  topics  suggested  for  discussion  accompanies  this  invita- 
tion. A  more  detailed  programme,  with  list  of  speakers,  will  be  arranged  prior  to  the 
meeting. 

The  headquarters  of  the  conference  will  be  at  the  Arlington  Hotel,  where  all  the  sessions 
will  be  held.  The  courtesies  of  the  Cosmos  Club,  which  is  situated  near  the  hotel,  are, 
by  the  kindness  of  its  officers,  extended  to  all  attending  the  conference. 

I  trust  that  you  may  find  it  convenient  to  be  present  at  this  conference  and  take  part 
in  its  deliberations.  If  you  are  unable  to  attend,  suggestions  along  the  line  of  the  pro- 
gramme will  be  welcome. 

I  shall  be  glad  to  have  you  extend  this  invitation  to  such  other  officials  and  economists 
of  your  city  as  you  may  find  interested  in  the  subject. 

Please  address  communications  to  Mr.  L.  G.  Powers,  Bureau  of  the  Census,  Washington, 
D.  C.,  the  chief  statistician  who  has  charge  of  the  census  investigation  concerning  municipal 
finance. 

Very  respectfully,  (Signed)  S.  N.  D.  NORTH, 

Director. 

(5) 


'Ifif 


CONFERENCE  CONCERNING  UNIFORM 
MUNICIPAL  ACCOUNTING 


In  response  to  the  foregoing  invitation  the  following  gentlemen 
met  in  the  city  of  Washington  in  the  banquet  hall  of  the  Arlington 
on  Tuesday,  February  13,  1906: 

H.  L.  Austin,  Attorney  Representing  New  York  State  Comptroller,  Catskill,  N.  Y. 

M.  N.  Baker,  Associate  Editor  Engineering  News,  New  York,  N.  Y.,  and  President  Board  of 

Health,  Montclair,  N.  J. 

James  F.  Beard,  City  Treasurer,  Somerville,  Mass. 
Howard  C.  Beck,  Deputy  City  Comptroller,  Detroit,  Mich. 
Louis  Betz,  Comptroller,  St.  Paul,  Minn. 

L.  A.  Cavanaugh,  Deputy  Auditor  City  and  County  of  Denver,  Denver,  Colo. 
Richard  M.  Chapman,  Expert  Accountant,  Comptroller's  Department,  New  York,  N.  Y. 
Harvey  S.  Chase,  Public  Accountant,  Boston,  Mass. 
Frederick  A.  Cleveland,  Accountant,  New  York,  N.  Y. 
Owen  Copelin,  Treasurer,  Harrisburg,  Pa. 

Frederick  B.  DeBerard,  Merchants'  Association  of  New  York,  New  York,  N.  Y. 
B.  I.  Dixon,  State  Auditor,  Raleigh,  N.  C. 
James  L.  Dyer,  Collector  and  Treasurer,  Portland,  Me. 
W.  McV.  Evans,  Auditor  and  Accountant,  Richmond,  Va. 
James  Blair  Farrar,  Special  Accountant,  Roanoke,  Va. 
Thomas  B.  Frost,  City  Treasurer  and  Collector  of  Taxes,  Chelsea,  Mass. 
Willett  B.  Gano,  City  Clerk,  Orange,  N.  J. 
J.  R.  Garrison,  Auditor,  District  of  Columbia. 
Harry  W.  Gough,  Comptroller,  Harrisburg,  Pa. 
W.  D.  Gridley,  Chief  Accountant,  Detroit,  Mich. 
Edward  M.  Hartwell,  Secretary  Statistics  Department,  Boston,  Mass. 
Harry  B.  Henderson,  State  Examiner,  Cheyenne,  Wyo. 
Lyman  C.  Hughes,  Comptroller,  Newcastle,  Pa. 
James  E.  Kane,  Deputy  Treasurer,  Rochester,  N.  Y. 
Daniel  W.  Kenney,  Auditor,  Holyoke,  Mass. 
J.  O.  Lea,  City  Treasurer,  Charleston,  S.  C. 
O.  S.  Luffman,  City  Comptroller,  Schenectady,  N.  Y. 
Henry  B.  F.  Macfarland,  District  Commissioner,  Washington,  D.  C. 
Duncan  Maclnnes,  Expert  Accountant,  Comptroller's  Department,  New  York,  N.  Y. 
F.  H.  Macpherson,  Chartered  Accountant,  Detroit,  Mich. 
Fred  W.  Martin,  Comptroller,  South  Bend,  Ind. 
J.  J.  McCardy,  Auditor,  Post  Office  Department,  Washington,  D.  C. 
Herman  A.  Metz,  Comptroller,  New  York,  N.  Y. 
Charles  L.  Moll,  Comptroller,  Reading,  Pa. 

Hart  Momsen,  Expert  Chief  of  Division,  Bureau  of  the  Census,  Washington,  D.  C. 
S.  N.  D.  North,  Director  of  the  Census,  Washington,  D.  C. 
L.  G.  Powers,  Chief  Statistician,  Bureau  of  the  Census,  Washington,  D.  C. 

(7) 


<5  UNIFORM    MUNICIPAL    ACCOUNTING. 

Thomas  H.  Pratt,  Auditor  and  City  Collector,  Lincoln,  Nebr. 

Henry  H.  Rathyen,  Accountant,  New  York,  N.  Y. 

George  N.  Rex,  Auditor,  Pawtucket,  R.  I. 

C.  G.  Rives,  Comptroller,  Shreveport,  La. 

Fred  L.  Rowe,  Auditor,  Haverhill,  Mass. 

Walter  J.  Shepard,  Treasurer,  Buffalo,  N.  Y. 

Joseph  T.  Tracy,  Bureau  of  Uniform  Accounting,  Columbus,  Ohio. 

Henry  E.  Turner,  Auditor  Commonwealth  of  Massachusetts,  Boston,  Mass. 

Alonzo  Tweedale,  Deputy  Auditor,  District  of  Columbia. 

Walter  M.  Tyson,  City  Treasurer,  Reading,  Pa. 

Harry  T.  Upham,  City  Auditor,  Cambridge,  Mass. 

Thomas  R.  Watson,  City  Clerk,  Passaic,  N.  J. 

Fred  F.  Wilde,  Deputy  Comptroller,  Milwaukee,  Wis. 

George  B.  Williams,  Deputy  Comptroller,  Rochester,  N.  Y. 

Charles  F.  Wilson,  Auditor  City  and  County  of  Denver,  Denver,  Colo. 

Clinton  R.  Woodruff,  Secretary  National  Municipal  League,  Philadelphia,  Pa. 


PROCEEDINGS  OF  SECOND  CONFERENCE. 


FIRST  SESSION,  TUESDAY  MORNING,  FEBRUARY  13. 

Mr.  L.  G.  Powers,  chief  statistician,  Bureau  of  the  Census,  called 
the  meeting  together  at  10.25  a.  m. 

Mr.  POWERS.  As  presiding  officer  of  the  first  conference  called 
relating  to  this  subject  it  is  my  pleasure  to  call  you  together,  and 
I  will  open  the  meeting  by  requesting  Mr.  Henry  B.  F.  Macfarland, 
one  of  the  District  Commissioners,  to  welcome  you  in  behalf  of  the 
District  of  Columbia. 

Mr.  MACFARLAND.  It  is  a  great  pleasure  for  me  to  address  the 
persons  here  present.  We  are  very  glad  indeed  to  have  you  here  on 
such  a  delightful  day;  it  is  a  typical  Washington  winter  day.  If 
the  weather  had  been  unfavorable,  wre  should  have  placed  the  respon- 
sibility for  it  upon  the  Weather  Bureau,  which,  however,  does  not 
belong  to  the  District  government;  but  whenever  the  w^eather  is 
favorable,  we  take  the  credit  for  it.  You  see  we  know  how  to 
arrange  facts  so  as  to  make  a  favorable  report  when  we  desire  a 
favorable  one,  and  an  unfavorable  report  when  that  is  desired. 

I  have  read  with  a  great  deal  of  interest  the  report  of  the  proceed- 
ings of  the  previous  conference  and,  therefore,  am  fully  informed  on 
the  subject  of  municipal  accounting.  I  received  a  great  many  ideas 
from  it,  but,  being  an  amateur,  I  had  some  difficulty  in  reconciling 
them,  and  I  can  not  say  yet  that  I  know  just  wrhat  is  the  best  system 
of  municipal  accounting.  I  hope,  however,  that  at  the  close  of  this 
conference  I  shall  have  reached  a  conclusion  in  such  a  way  that  I 
shall  know  which  is  the  best  form  for  the  statement  of  results. 

The  object  which  you  have  in  view  appeals  to  all  of  us,  who  have 
anything  to  do  with  municipal  affairs,  as  a  most  important  one. 
We  are  sure  that  all  municipal  officials  wish  success  to  the  effort  of 
standardizing  general  results  of  our  municipal  operations.  It  is 
most  important  that  the  citizen  should  be  able  to  know  precisely 
what  the  state  of  the  business  of  his  municipality  is.  That  is  business 
and  nothing  else.  Here  in  Washington  we  are  very  fortunate  in 
being  able  to  treat  it  as  a  business  and  nothing  else;  but  wlierever 
it  is  carried  on,  it  should  be  treated  in  just  such  a  way  that  the 
citizen  should  know,  or  ought  to  be  able  to  know,  exactly  what  the 

(9) 


10  UNIFORM    MUNICIPAL   ACCOUNTING. 

truth  is  about  the  affairs  of  his  municipality.  That  is  impossible 
unless  the  reports  are  made  as  you  gentlemen  desire  that  they  should 
be  made — that  is,  clearly  and  simply.  It  is  important  that  we  should 
have  accurate  municipal  statistics,  and  in  order  to  have  them,  we 
must  have  them  stated  in  such  a  way  that  we  can  have  accurate 
comparisons.  Nothing  is  more  misleading  than  comparisons  of 
municipal  statistics  when,  the  names  being  the  same,  the  things  are 
different;  and  it  is  therefore  impossible,  with  all  due  respect  to  our 
eminent  chairman,  at  the  present  time  to  have  absolutely  accurate 
comparisons  of  municipal  statistics. 

"  Figures  will  not  lie  "  the  proverb  says,  but  even  in  the  hands  of  the 
best  of  men,  things  which  are  not  comparable  may  seem  to  lie  where 
the  names  may  be  the  same  yet  the  things  are  different,  and  there  is 
the  difficulty  with  the  comparison  of  municipal  statistics  at  the 
present  time. 

I  was  very  much  gratified  when  an  eminent  member  of  this  con- 
ference told  me  yesterday  that  he  thought  the  reports  of  the  District 
government  are  clear  and  understandable,  and  also  that  the  District 
bookkeeping  had  met  with  the  approval  of  the  gentleman  who  sug- 
gested the  Ohio  uniform  system  of  accounting.  But  we  are  looking 
for  improvements;  we  are  always  looking  for  better  definitions  in 
the  District,  and  we  look  confidently  to  you,  gentlemen,  for  a  uniform 
system  which  will  benefit  us  as  well  as  all  the  other  municipalities 
of  the  country.  I  can  think  of  no  greater  service  to  municipal 
accounting  than  that  which  you  gentlemen  can  render. 

Mr.  POWERS.  The  Director  of  the  Census,  Hon.  S.  N.  D.  North, 
will  extend  greetings  in  behalf  of  the  Department  of  Commerce  and 
Labor.  [Applause.] 

Mr.  NORTH.  It  is  a  pleasure  and  a  privilege  to  join  Commissioner 
Macfarland  in  welcoming  to  Washington  so  large  and  representative 
a  body  of  the  comptrollers,  auditors,  treasurers,  and  financial  officers 
of  our  principal  American  cities.  The  Secretary  of  Commerce  and 
Labor,  upon  whom  this  pleasure  and  privilege  naturally  devolve,  is 
unavoidably  absent  from  the  city,  and  has  charged  me  to  assure  you 
of  his  regret  that  he  can  not  meet  with  you,  and  of  his  deep  personal 
and  official  interest  in  the  work  you  are  about  to  undertake. 

It  is  a  great  work — as  great  and  important  a  work  as  any  now 
on  foot — to  perfect  and  protect  the  American  system  of  municipal 
self-government,  and  to  emancipate  it  from  some  of  the  evils  which 
encompass  and  discredit  it. 

As  I  understand  it,  the  object  you  seek,  in  which  the  Census  Office 
is  earnestly  striving  to  cooperate,  may  be  concisely  stated  in  the 
phrase,  "the  standardization  of  municipal  accounting."  As  the 
financial  officers  of  our  municipalities,  you  have  a  natural  pride  in 
your  business  and  a  desire  to  apply  to  it  the  best  and  most  scientific 


UNIFORM    MUNICIPAL   ACCOUNTING.  11 

methods.  You  also  realize  what  a  protection  standardization  will  be 
to  you  in  the  discharge  of  your  duties.  Even  more  important,  from 
the  public  point  of  view,  is  the  practical,  effective  protection  which 
uniform  municipal  accounting  will  afford  against  what  is  commonly 
known  as  municipal  "graft." 

The  most  prolific  source  of  municipal  graft,  its  securest  hiding 
place,  its  most  effective  instrument  in  seeking  immunity,  is  the  chaos 
which  exists  in  the  classification  of  municipal  accounts,  and  the 
absence  of  uniformity  in  municipal  bookkeeping. 

Another  aspect  of  the  subject  can  not  fail  to  impress  the  thoughtful 
observer  of  present  day  conditions.  There  is  a  rising  throughout  the 
land,  the  result  of  systematic  propaganda — a  movement  for  municipal 
ownership  and  management  of  public-service  utilities.  Sooner  or 
later  we  have  got  to  face  this  question,  and  there  is  bound  to  be 
increasing  experimentation  along  these  lines.  It  is  impossible  intel- 
ligently to  study  and  measure  these  experiments,  until  we  possess 
definite  standards  by  which  to  compare  the  results  of  private  and 
public  management  of  these  utilities.  In  the  existing  chaos  of 
municipal  accounting  this  is  impossible,  and  we  grope  and  flounder 
in  the  dark.  What  an  object  lesson  it  would  be,  in  the  consideration 
of  this  impending  question,  if  it  were  possible  for  the  Census  Office  to 
present  a  complete  statement  of  the  relative  sums  which  private  cor- 
porations have  paid  and  are  paying  for  the  use  and  monopoly  of  the 
public  streets  in  the  different  cities  of  the  land! 

We  have  in  the  United  States  175  cities  with  a  population  of  30,000 
or  more — the  most  magnificent  group  of  cities,  the  wealthiest,  most 
progressive,  most  prosperous  group  of  cities  in  the  world — and  they 
are  resting  to-day  under  the  stigma  of  being  the  most  extravagantly 
and  inefficiently  governed  group  of  cities.  The  financial  officers 
of  these  cities  annually  collect  and  disburse  a  sum  exceeding 
$765,000,000,  or  more  than  the  annual  cost  of  all  the  state  govern- 
ments, and  more  than  the  annual  cost  of  maintaining  the  National 
Government.  These  cities  have  a  bonded  or  funded  indebtedness 
equaling  $1,500,578,000,  after  deduction  for  sinking  fund  assets — an 
indebtedness  greater  than  that  of  the  United  States.  This  municipal 
indebtedness  is  increasing  at  an  enormous  rate,  probably  not  less 
than  $150,000,000  a  year. 

Until  very  recently,  and  since  this  general  movement  was  organ- 
ized, no  two  of  these  cities  have  kept  their  books  in  such  shape  that 
receipts  and  expenditures  for  particular  purposes  can  be  compared 
with  similar  receipts  and  expenditures  of  other  municipalities.  It 
goes  without  saying  that,  given  half  a  dozen  cities  of  practically  the 
same  population  and  the  same  geographic  and  climatic  conditions, 
the  costs  of  government — for  police,  fire,  and  many  similar  services — 
ought  to  be  substantially  the  same. 


12  UNIFORM    MUNICIPAL    ACCOUNTING. 

If  there  can  be  a  standardization  of  municipal  accounts,  it  will  be 
easy  to  ascertain  from  the  annual  Census  bulletins  the  exact  amount 
by  which  any  particular  service  in  any  one  of  these  cities  exceeds  the 
corresponding  cost  in  the  others.  Wherever  the  cost -is  shown  to  be 
excessive  it  will  appear  at  once  that  something  is  wrong  in  the  gov- 
ernment of  that  city.  It  will  then  be  possible  to  put  the  public  finger 
on  the  precise  spot  where  the  people's  money  is  being  wasted  or  stolen. 

I  knowT  a  certain  corporation  which  has  been  remarkably  successful 
in  the  management  of  street  railroads  operated  under  all  sorts  of  con- 
ditions. It  has  been  able  to  place  many  roads  upon  a  paying  basis 
which  were  turned  over  to  it  in  a  state  of  apparently  hopeless  bank- 
ruptcy. It  has  done  this  by  standardizing  the  expense  accounts. 
These  expenses  are  classified  minutely.  Each  road  is  required  to 
furnish  a  weekly  statement  of  expenditures  under  each  head,  and 
when  any  road  shows  for  any  item  an  unusual  deviation  from  the 
average  cost  for  all  the  roads,  an  agent  is  sent  to  find  out  what  is  the 
matter.  Neither  graft  nor  waste  is  possible  anywhere  under  such  a 
system,  properly  supervised.  The  expenditures  of  American  cities 
should  be  checked  in  the  same  way,  and  with  the  same  results. 

To  make  this  possible  there  must  be  agreement  upon  the  proper 
classification  of  municipal  accounts;  there  must  be  a  standardization 
of  municipal  bookkeeping.  When  that  is  accomplished,  graft  and 
waste  can  be  driven  from  their  chief  citadel  of  refuge. 

My  attention  was  first  drawn  to  the  possibilities  for  good  which  lie 
in  these  annual  Census  reports  on  municipal  statistics,  when  a  propo- 
sition to  substitute  biennial  reports  for  those  now  made  annually  was 
under  consideration  in  the  Office.  We  sought  outside  advice  on  the 
question,  and  I  was  amazed  at  the  protest.  I  was  told  that  these 
comparative  municipal  statistics  afforded  the  most  useful  check  that 
existed  upon  the  growth  of  municipal  expenditures;  that  students  of 
the  subject  regarded  their  annual  compilation  as  indispensable  for  the 
close  study  and  rational  regulation  of  municipal  finance ;  and  that  the 
chief  criticism  upon  them  was  the  fact  that  the  statistics  could  not 
be  so  classified  as  to  make  them  comparable,  city  with  city. 

This  led  to  a  careful  study  in  the  Census  Office  of  possible  methods 
of  meeting  the  criticism.  "  It  was  seen  that  the  practical  way  was  to 
enlist  the  active  cooperation  of  the  municipal  officers  themselves,  and 
that  the  Census  Office  might  be  made  the  agency  or  clearing  house 
through  whose  reports  standardization  might  be  gradually  developed 
and  extended.  That  is  the  origin  of  these  conferences. 

I  may  add,  with  what  I  hope  is  a  pardonable  pride,  that  this  is  only 
one  of  many  directions  in  which  the  Census  Office  is  proving  a  potent 
instrumentality  for  the  standardization  of  official  statistics.  It  is  a 
field  of  usefulness  not  thought  of  when  the  effort  to  establish  a  perma- 
nent Census  Office  was  finally  successful.  It  is  destined  to  prove  the 


UNIFORM    MUNICIPAL    ACCOUNTING.  13 

most  valuable  result  of  that  legislation.  Nowhere  can  this  function 
be  utilized  to  greater  public  advantage  than  in  the  field  which  espe- 
cially concerns  this  conference.  Your  presence  here  proves  your 
patriotic  interest  in  the  practical  solution  of  the  greatest  problem 
which  confronts  the  American  people  to-day — the  problem  of  the 
honest,  efficient,  and  economical  conduct  of  the  American  munici- 
pality under  democratic  institutions. 

Mr.  POWERS.  I  do  not  see  the  chairman  of  the  advisory  committee, 
Mr.  McGann;  is  he  present?  It  is  with  keen  regret  that  I  note  his 
absence.  I  have  caUed  this  convention  to  order  as  the  chairman  of 
the  previous  meeting,  but  it  seems  to  me  that  the  first  work  to-day 
should  be  the  election  of  a  chairman  and  a  secretary,  and  unless  there 
is  objection  I  will  call  for  the  election  of  these  officers. 

Mr.  HENDERSON.  Mr.  Chairman  and  gentlemen  of  the  conference, 
I  beg  to  nominate  Hon.  L.  G.  Powers,  who  presided  so  kindly,  and 
who  made  the  last  conference  such  a  wonderful  success,  as  chairman 
of  this  conference.  I  move  the  nomination  of  Mr.  Powers. 

Mr.  CHASE.  I  second  the  motion. 

Mr.  HENDERSON.  As  many  of  you  as  are  in  favor  of  Mr.  Powers's 
election  to  the  position  of  chairman  of  this  convention  will  please  give 
your  assent  by  saying  "Aye;"  contrary,  "No."  The  "Ayes" 
have  it.  Mr.  Powers,  you  have  been  unanimously  elected  to  the 
position  of  chairman  of  this  convention. 

Mr.  POWERS.  Gentlemen,  I  take  this  to  be  but  another  expression 
of  the  kindly  feeling  that  has  been  uniformly  shown  by  these  officials 
in  their  relations  with  the  Census  Bureau.  It  has  been  the  greatest 
satisfaction  of  my  life  that  on  the  part  of  the  city  officials  throughout 
this  country  there  has  been  nothing  in  this  movement  but  a  desire  to 
cooperate  with*  the  Census  Bureau. 

We  had  many  extraordinary  questions  that  had  to  be  discussed, 
and  that  were  discussed  earnestly  because  we  looked  upon  them  from 
different  standpoints;  but  with  all  this  discussion  there  was  a  vital 
interest  in  it,  and  there  has  been,  so  far  as  I  know,  nothing  but  kindly 
feeling  and  the  greatest  of  cooperation.  In  this  spirit  I  meet  you 
to-day,  and  welcome  you  to  this  conference,  and  trust  that  this  work, 
like  that  of  the  preceding  conference,  will  help  us  and  will  help  you— 
will  help  us  to  perfect  our  work,  for  it  is  not  what  we  would  like  it  to 
be — perfect.  We  are,  however,  working  in  the  right  spirit. 

In  behalf  of  the  Census  Bureau  and  our  men,  whom  you  have  met 
cordially  and  to  whom  you  have  extended  all  the  aid  that  was  in  your 
power  to  render,  I  thank  you  for  this  continued  effort  and  for  your 
hearty  cooperation. 

Mr.  NORTH.  Mr.  Chairman,  I  think  the  conference  will  be  fortunate 
if  it  can  command  the  services  of  the  secretary  of  the  last  conference, 
and  I  nominate  Doctor  Hartwell,  of  Boston. 


14  UNIFORM    MUNICIPAL   ACCOUNTING. 

Mr.  HENDERSON.  I  second  the  nomination. 

The  CHAIRMAN.  *You  have  heard  the  motion  that  Doctor  Hartwell, 
of  Boston,  be  made  the  secretary  of  the  conference.  All  those  in  favor 
of  this  motion  will  signify  the  same  by  saying  "Aye;"  contrary, 
"No."  The  "Ayes"  have  it. 

Doctor  HARTWELL.  Gentlemen,  I  am  very  much  obliged  to  you 
for  the  honor  which  you  have  conferred  upon  me,  and  for  the  oppor- 
tunity of  being  kept  busy  here  with  you,  as  I  am  rather  fearful  that 
otherwise  I  might  be  tempted  to  spend  my  time  in  mischief. 

The  CHAIRMAN.  From  our  experience  at  the  last  conference,  I 
suggest  that  the  conference  appoint  a  committee  on  programme,  such 
as  we  had  two  years  ago.  While  we  have  a  tentative  programme,  we 
found  two  years  ago  that  there  were  several  members  who  wanted  to 
have  special  matters  brought  up.  In  fact,  some  of  those  matters  were 
the  most  interesting  and  the  most  valuable  features  of  the  conference. 
I  therefore  suggest  that  such  a  committee  be  appointed. 

Mr.  CHASE.  I  move  that  the  chair  appoint  such  a  committee,  to 
consist  of  ten  members. 

Mr.  MAC!NNES.  Have  we  not  here  a  programme  outlined  as  to  what 
it  is  our  purpose  to  do?  I  can  not  see  the  object  in  having  a  com- 
mittee. 

The  CHAIRMAN.  We  have  a  programme  in  a  general  way;  yes,  that 
is  very  true. 

Mr.  MAC!NNES.  The  reason  I  asked  the  question  is  that  at  the  last 
conference,  held  in  November,  1903,  such  a  committee  was  appointed 
because  we  had  not  any  clear  programme  outlined,  or  laid  down,  and 
it  was  necessary  to  have  a  committee  appointed.  At  that  conference 
we  had  to  wait  many  hours  upon  that  committee.  I  believe  a  great 
deal  of  valuable  time  was  lost  in  that  way.  We  were  then  seeking 
to  do  our  business  by  proxy  instead  of  as  a  committee  of  the  whole. 
From  that  experience,  and  recognizing  that  to-day  we  have  a  printed 
programme  outlining  our  procedure,  it  seems  to  me  that  we  should 
be  more  likely  to  lose  than  gain  time  by  the  appointment  of  such  a 
committee,  since  the  committee  appointed  for  the  purpose  of  deter- 
mining what  we  should  do  might  take  several  hours  and  we  in  the 
meantime  be  doing  practically  nothing.  Therefore  I  think  that  it 
would  save  time  if  we  did  not  have  such  a  committee  appointed. 

The  CHAIRMAN.  You  have  heard  the  objection  to  the  motion, 
made  by  our  friend  from  New  York. 

Mr.  HENDERSON.  I  think  Mr.  Maclnnes  is  somewhat  mistaken.  I 
think  the  committee  furnished  us  with  some  very  valuable  sugges- 
tions, which  were  necessary  at  that  time.  There  was  not  very  much 
delay,  as  the  sessions  continued  all  the  time,  even  into  the  night.  I 
think  it  is  a  wise  policy  to  have  a  committee  looking  toward  some 
definite  end  for  the  purpose  of  carrying  out  our  programme. 


UNIFORM    MUNICIPAL    ACCOUNTIN 


The  CHAIRMAN.  Is  there  any  further  discussion  of  the  motion?  If 
there  is  no  further  discussion  or  amendment,  I  will  put  the  motion. 

Mr.  NORTH.  Why  not  broaden  the  functions  of  that  committee, 
and  have  any  resolutions  that  may  be  suggested  referred  to  that 
committee  ?  There  does  not  seem  to  be  any  necessity  for  more  than 
one  committee,  and  it  might  be  well  to  have  the  committee  to  call 
upon,  in  the  end,  to  formulate  the  action  of  this  conference,  and  if  it  is 
entirely  agreeable  to  the  maker  of  the  motion,  I  suggest  that  it  be 
amended  so  as  to  broaden  its  scope. 

The  CHAIRMAN.  If  that  is  agreeable  to  all,  the  motion  will  be  put 
as  amended,  so  as  to  make  this  a  committee  on  results  as  well  as  on 
arrangements.  Is  there  any  further  discussion  or  amendment? 
All  those  in  favor  of  the  motion  as  amended  will  signify  the  same  by 
saying  "Aye;"  contrary,  "No."  The  motion  prevails.  I  will 
announce  the  committee  at  a  little  later  time. 

We  have  on  the  programme,  as  arranged,  as  the  first  subject  for 
the  morning,  the  report  of  Dr.  Edward  M.  Hartwell,  of  Boston,  sec- 
retary of  the  advisory  committee,  who  will  speak  on  "The  Present 
Situation  Viewed  in  the  Light  of  Events  Since  the  Conference 
of  1903." 

Doctor  HARTWELL.  Mr.  Chairman  and  members  of  the  confer- 
ence, I  am  called  upon  to  speak  on  "The  Present  Situation  Viewed 
in  the  Light  of  Events  Since  the  Conference  of  1903."  At  that  time 
we  met  with  a  feeling  of  hope,  and  now  we  do  so  with  a  feeling  that 
our  hopes  have  been  abundantly  fulfilled.  This  conference  looks 
to  be  twice  as  large  as  that  of  1903;  at  the  same  time  we  see  here 
to-day  many,  if  not  most,  of  those  who  attended  that  conference. 
Those  who  attended  the  former  conference  could  not  fail  to  be  im- 
pressed by  its  extraordinary  avidity  for  work.  Not  only  were  our 
sessions  numerous  —  five  in  two  days  —  but  they  were  even  prolonged 
into  the  night  by  reason  of  the  interest  aroused  by  the  interchange 
of  views  as  to  the  municipal  balance  sheets,  statements  of  assets 
and  liabilities,  classified  schedules,  and  the  like.  Its  results  are  to 
be  found  reflected  in  the  tabular  presentations  of  financial  statistics 
in  Census  Bulletin  20,  and  in  the  large  and  representative  attendance 
here  and  now  at  the  recent  invitation  of  the  Bureau  of  the  Census. 

In  order  that  we  may  realize  the  character  of  the  course  of  events 
since  1903  and  the  significance  of  the  present  tendencies  of  the  move- 
ment in  whose  sweep  we  find  ourselves  at  this  moment,  I  venture  to 
call  your  attention  to  some  facts  that  may  seem  matters  of  ancient 
history  to  not  a  few  here  present.  The  conference  called  by  the 
Bureau  of  the  Census  in  November,  1903,  gave  new  force  and  direc- 
tion to  a  movement  which  had  been  slowly  but  surely  gaining  ground 
for  nearly  ten  years  namely,  the  movement  to  make  the  public 
reports  of  municipal  financial  operations  more  simple,  more  intelligible, 
more  complete,  and  more  useful  —  or,  in  short,  more  comparable. 

27311—06  -  2 


16  UNIFORM    MUNICIPAL    ACCOUNTING. 

Prior  to  that  movement  there  was  a  somewhat  similar  movement, 
beginning  in  1878,  for  subjecting  the  accounts  of  counties  and  of  state 
institutions  to  central  control  in  certain  states. 

In  1878  the  state  of  Minnesota  established  the  office  of  state  exam- 
iner. The  examiner  was  charged  with  the  duty  of  looking  after 
county  accounts,  because  they  needed  looking  after;  and  empowered 
to  prescribe  uniform  methods  in  keeping  the  accounts  of  state  insti- 
tutions and  of  county  officials.  North  and  South  Dakota,  admitted 
to  the  Union  in  1889,  followed  the  example  of  Minnesota  by  estab- 
lishing state  examiners;  so  did  the  state  of  Wyoming,  which  was 
admitted  to  the  Union  in  1890.  In  accordance  with  its  constitution 
a  state  examiner  was  appointed  in  1892,  with  jurisdiction  and  func- 
tions similar  to  those  of  the  Minnesota  examiner.  The  office  of  state 
examiner  in  Wyoming  has  been  admirably  filled  from  the  first  by  our 
friend  Mr.  Henderson,  who  is  a  member  of  this  as  he  was  of  the  last 
conference.  In  1891  the  state  examiner  of  Minnesota  was  given 
partial  jurisdiction  over  the  accounts  and  financial  reports  of  the 
city  of  St.  Paul,  and  since  1903  similar  jurisdiction  has  been  granted 
him  over  the  accounts  of  the  city  of  Minneapolis;  but  it  does  not 
appear  that  the  present  movement  for  securing  uniform  municipal 
accounting  has  been  appreciably  influenced  by  the  example  of  Min- 
nesota and  her  sister  states,  or  by  the  institution  in  1887  by  the  gov- 
ernment of  Massachusetts  of  the  office  of  comptroller  of  county 
accounts. 

The  present  movement  is  concerned  distinctly  with  municipal 
accounts  and  reports.  Its  relation  to  the  movement  for  standard- 
izing county  accounts  is  hardly  more  than  one  of  succession  in  time. 
Although  the  second  movement  followed  the  first,  it  can  not  be  shown 
that  it  developed  out  of  it.  Its  origin  is  rather  to  be  ascribed  to  that 
interest  in  matters  pertaining  to  municipal  government  which  was 
one  of  the  distinctive  features  of  political  discussion  in  the  United 
States  during  the  last  decade  of  the  nineteenth  century.  That 
interest  was  first  voiced  by  students  and  publicists  rather  than  by 
comptrollers  or  accountants.  The  first  definite  suggestion  for  secur- 
ing uniformity  of  classification  in  municipal  accounts  and  reports 
which  has  come  to  my  notice  is  found  in  the  Annals  of  the  American 
Academy*  of  Political  and  Social  Science  for  May,  1895,  in  an  article 
by  Prof.  John  R.  Commons,  a  well-known  student  of  social  and 
economic  questions.  The  article  is  entitled  "  State  Supervision  of 
Cities."  The  author  recommended  the  establishment  of  a  " state 
municipal  board/'  to  consist  of  the  governor,  attorney-general,  and 
auditor  of  the  state,  ex  officiis,  together  with  six  or  ten  unsalaried 
members,  to  be  appointed  by  the  governor,  representing  equally 
the  two  principal  political  parties,  with  terms  of  office  from  six  to 
ten  years.  The  duties  proposed  for  the  contemplated  board  were 


UNIFOEM    MUNICIPAL   ACCOUNTING.  17 

chiefly  supervisory.  One  of  the  principal  agencies  of  the  proposed 
board  was  the  auditing  department,  to  be  composed  of  experts,  with 
power  to  prescribe  a  system  of  bookkeeping,  to  inspect  municipal 
books  of  account,  and  to  make  reports  giving  the  comparative  stand- 
ing of  all  cities  within  its  jurisdiction  in  the  more  important  items 
of  expenditures,  revenues,  tax  rate,  and  debt. 

In  the  course  of  the  next  three  years  futile  attempts  were  made  in 
several  states  to  secure  the  creation  of  such  boards,  but  Professor 
Commons's  secondary  suggestion,  with  regard  to  uniform  municipal 
accounting,  proved  a  fruitful  one.  In  1896  Mr.  F.  R.  Clow,  in  an 
article  entitled  " Suggestions  for  the  Study  of  Municipal  Finance"  in 
the  Quarterly  Journal  of  Economics,  set  forth  a  scheme  for  the  classi- 
fication of  municipal  accounts.  Mr.  Clow  declared  that  "it  would  be 
Utopian  to  expect  any  considerable  number  of  American  cities  even 
to  make  their  regular  financial  reports  on  such  a  plan,  or  indeed  on 
any  other  plan/'  and  then  went  on  to  say  that  "the  plan  is  neverthe- 
less not  so  Utopian  as  it  seems."  The  Federal  Census  has  made  a 
good  beginning  in  municipal  statistics.  "  If  the  statistics  were  made 
complete  for  the  larger  cities  and  for  some  typical  small  cities,  etc.,  the 
most  essential  thing  would  be  accomplished.  If  some  well-known 
organization,  like  the  National  Municipal  League  or  one  of  the  great 
universities,  should  undertake  such  a  work,  many  city  governments 
could  probably  be  induced  to  cooperate."  Special  interest  attaches 
to  the  views  of  Mr.  Clow,  expressed  in  1896,  by  reason  of  the  part 
which  the  Federal  Census  and  the  National  Municipal  League  have 
come  to  play  in  the  field  which  looked  comparatively  hopeless  ten 
years  ago. 

In  the  interval  between  1896  and  1901  (when  the  National  Munici- 
pal League  became  especially  identified  with  the  movement,  through 
the  institution  of  its  committee  on  uniform  accounting  and  statistics) 
various  contributory  influences  served  to  quicken  and  spread  interest 
in  our  subject.  The  proceedings  of  the  National  Municipal  League 
for  the  years  1896-1900  contain  no  less  than  eleven  papers  or  reports 
on  various  phases  of  the  problem  of  securing  uniformity  in  municipal 
accounts  and  reports.  In  the  same  period  a  dozen  other  national 
associations,  notably  the  League  of  American  Municipalities,  the 
American  Society  of  Civil  Engineers,  the  American  Economic  Associa- 
tion, and  the  American  Statistical  Association  were  induced  to  pass 
resolutions  or  appoint  special  committees,  with  a  view  to  securing 
practical  results.  An  important  step  was  taken  in  July,  1898,  when 
an  act  of  Congress  was  passed  authorizing  the  United  States  Com- 
missioner of  Labor  "to  compile  and  publish  annually  an  abstract  of 
the  main  features  of  the  official  statistics  of  the  cities  of  the  United 
States  having  over  30,000  population."  The  original  plan  of  the 


18  UNIFORM    MUNICIPAL    ACCOUNTING. 

department  to  base  its  tables  upon  published  municipal  reports  was 
soon  abandoned,  owing  to  the  confused  and  heterogeneous  nature  of 
such  reports,  and  special  agents  were  deputed  by  the  Commissioner 
of  Labor,  Hon.  Carroll  D.  Wright,  to  visit  the  fiscal  officers  of  the 
cities  within  the  scope  of  the  investigation.  Under  this  plan  the 
Department  of  Labor  published,  in  its  bulletin,  four  series  of  extensive 
tables  entitled  "Statistics  of  Cities"  for  the  years  1898,  1899,  1900, 
and  1901,  respectively.  The  work  of  preparing  similar  statistics  for 
subsequent  years  was  taken  over  by  the  Bureau  of  the  Census,  which 
was  placed  on  a  permanent  basis  in  the  year  1902. 

In  1901  the  National  Municipal  League,  as  has  been  already  men- 
tioned, appointed  a  special  committee  uto  give  special  consideration 
to  the  subject  of  uniform  municipal  accounts  and  statistics."  That 
committee  has  played  an  active  part  in  the  movement  ever  since.  Of 
the  twelve  persons  who  made  up  the  original  committee,  four  were  or 
had  been  teachers  of  political  science  or  political  economy,  three  were 
auditors,  two  were  public  accountants,  two  held  official  posts  under 
state  or  city  governments,  and  one  was  a  lawyer.  As  at  present  con- 
stituted, the  committee  includes  six  persons  connected  with  colleges 
or  universities,  four  public  accountants,  five  public  officials,  two  law- 
yers, and  one  editor.  Of  its  eighteen  members,  eight  have  served 
continuously  since  1901.  The  committee  may  be  truthfully  charac- 
terized as  a  working  committee.  It  has  added  considerably  to  the 
stream  of  literature,  and  succeeded,  in  some  measure  at  least,  in  throw- 
ing light  upon  the  problems  with  which  it  has  set  itself  to  deal. 

The  policy  of  the  committee  has  been  tentative  and  elastic  in  its 
nature.  From  the  first  it  has  not  attempted  to  elaborate  a  system  of 
bookkeeping,  but  has  sought  to  convince  fiscal  officers  and  the  public 
of  the  feasibility  of  restating  the  results  of  customary  and  even  anti- 
quated systems  of  accounting  (as  reflected  in  the  usual  reports  of 
comptrollers,  etc.),  in  accordance  with  standard  schedules  devised  to 
secure  a  reasonable  degree  of  uniformity  and  comparability.  It  has 
developed  gradually  a  series  of  such  schedules,  which  are  now  termed 
the  uniform,  group-system  schedules  of  the  National  Municipal 
League.  These  schedules,  as  regards  their  more  important  features, 
were  derived,  with  some  modifications,  from  a  series  of  schedules  pub- 
lished in  1899  by  Prof.  L.  S.  Howe,  of  the  University  of  Pennsylvania, 
in  connection  with  the  municipal  programme  adopted  by  the  National 
Municipal  League  in  that  year,  Doctor  Kowe  being  one  of  the  com- 
mittee which  drew  up  the  municipal  programme,  in  which  precise  and 
clear  provision  was  made  for  the  central  administrative  control  of 
municipal  accounts  and  reports. 

The  committee  has  served  as  a  rallying  point  for  students,  officials, 
and  practical  men  interested  in  the  improvement  of  financial  statistics, 
and  has  been  instrumental,  both  as  a  committee  and  through  the 


UNIFORM    MUNICIPAL    ACCOUNTING.  19 

efforts  of  individual  members,  in  subjecting  the  schedules  which  it 
has  recommended  from  time  to  time  to  the  test  of  practical  use.  Cer- 
tain of  its  members,  in  their  professional  capacity  as  expert  account- 
ants, have  been  influential  in  installing  new  systems  of  accounting 
and  instituting  improved  forms  of  comptroller's  report  in  Chicago, 
Minneapolis,  and  other  cities,  and  also  in  bringing  about  the  publica- 
tion  of  restatements  of  comptrollers'  or  auditors'  reports  of  Boston, 
Baltimore,  Newton,  and  Cambridge,  Mass.,  in  accordance  with  the 
forms  recommended  by  the  committee.  Its  schedules  have  been 
adopted  as  the  central  part  of  the  scheme  of  uniform  accounts  and 
reports  established  by  law  in  the  states  of  Ohio  and  New  York.  The 
committee  has  had  cordial  relations  with  the  Department  of  Labor 
and  the  Bureau  of  the  Census,  and  the  latter  has  availed  itself  of  the 
committee's  recommendations  and  forms  in  the  preparation  of  its 
Bulletin  20,  1905.  The  committee,  besides  providing  a  rallying  point 
for  those  who  were  interested  especially  in  the  questions  it  was 
appointed  to  consider,  has  served  as  a  sort  of  intelligence  bureau  and 
recruiting  office  combined.  Evidence  of  its  ubiquity  and  activity  is 
not  far  to  seek,  inasmuch  as  eight  of  its  members,  including  the  chair- 
man of  this  conference,  are  present  here  to-day. 

When  the  Bureau  of  the  Census  undertook  to  carry  forward  the 
work  originally  begun  by  the  Department  of  Labor  in  1898,  thanks  to 
the  movement  whose  growth  I  have  sketched  briefly,  it  found  a 
goodly  number  of  public  officers,  professional  accountants,  and  zeal- 
ous students  ready  to  welcome  its  advent  and  to  second  its  efforts. 
The  Bureau,  in  gathering  material  for  statistics  relating  to  the  wealth, 
debt,  and  taxation  of  cities  of  the  United  States  for  the  year  1902, 
speedily  acquired  a  realizing  sense  of  the  complexity  and  difficulty, 
as  well  as  of  the  magnitude  of  its  undertaking.  Happily  for  our 
cause  it  promptly  conceived  the  policy  of  securing  the  good  will  and 
enlisting  the  cooperation  of  municipal  fiscal  officers  throughout  the 
country.  In  pursuance  of  that  policy  the  conference  of  1903  was 
held  in  this  city.  The  conference  proved  mutually  beneficial  to  those 
who  called  it  and  those  who  answered  the  call.  The  deliberations  of 
the  conference,  interesting  and  valuable  in  themselves,  were  rendered 
doubly  influential  through  their  dissemination  by  the  Bureau  of  the 
Census.  As  a  result  of  the  conference  the  Bureau  modified  and  im- 
proved its  plan  of  campaign,  recast  somewhat  its  schedules  and  the 
code  of  instructions  for  its  field  agents,  and  determined  to  bring 
together  into  one  publication  on  a  common  basis  the  statistics  for  the 
year  1903  in  conjunction  with  those  for  the  year  1902. 

The  period  1903-1906,  for  the  most  part,  does  not  afford  new  or 
vivid  points  of  contrast  with  the  period  of  like  duration  immediately 
preceding  the  first  conference  held  under  the  auspices  of  the  Census 
Bureau.  There  has  been  a  continuance  of  discussion,  of  widening 


20  UNIFORM    MUNICIPAL   ACCOUNTING. 

interest,  and  of  encouraging  and  convincing  experiment  along  lines 
of  endeavor  established  in  the  earlier  years  of  the  movement.  In  the 
period  under  review  a  number  of  cities  and  towns  have  caught  the 
new  spirit  and  taken  measures  to  improve  their  fiscal  reports  or  sys- 
tems of  accounting  or  both.  New  systems  of  accounting  and 
improved  forms  of  financial  reports  have  been  adopted  by  the  cities 
of  Minneapolis,  Minn.,  and  Pawtucket,  R.  I.  The  auditor  of  St.  Louis 
and  the  comptroller  of  Duluth  have  introduced  new  features  into 
their  annual  reports;  and  the  last  two  reports  issued  by  the  comp- 
troller of  the  city  of  New  York  are  marked  by  radical  and  extensive 
improvements  in  respect  to  plan  and  make-up.  At  the  St.  Louis 
exposition  a  congress  of  professional  accountants  was  held,  in  which 
representatives  of  the  most  influential  associations  of  expert  account- 
ants in  this  country  and  Europe  took  part.  Foremost  among  their 
discussions  was  that  relating  to  the  subject  of  municipal  accounting. 
Within  the  past  two  years  the  uniform  system  of  accounts  and  reports, 
under  the  supervision  of  the  state  auditor,  established  for  all  the 
cities  in  Ohio  by  the  act  of  1902,  has  been  put  into  operation  and 
thoroughly  tested,  with  gratifying  results.  The  influence  of  the  Cen- 
sus Bureau  has  been  stimulating  and  salutary,  in  awakening  new  inter- 
est in  its  work,  in  directing  old  interest  into  new  channels,  in  strength- 
ening the  hands  of  those  already  in  the  field,  and  in  bringing  new 
recruits  into  the  service. 

The  wisdom  of  the  Bureau's  frank,  open-minded,  and  progressive 
policy  has  been  justified  by  the  nature  of  the  welcome  accorded  its 
initiative  and  leadership.  The  decision  of  the  Bureau  to  publish  the 
Statistics  of  Cities  annually  instead  of  biennially  can  not  fail  to  pro- 
mote progress.  The  publication  of  Census  Bulletin  20  in  1905  was  an 
event  of  capital  importance.  It  is  a  pleasure  to  note  the  apprecia- 
tive reception  given  that  document  by  politicians  and  the  public  as 
well  as  by  municipal  officials,  from  whose  records  the  raw  material 
for  the  tables  contained  in  it  was  derived.  Bulletin  20  is  an  impress- 
ive and  praiseworthy,  even  an  inspiring,  document,  but  it  does  not 
betoken  our  entrance  upon  the  millennium  we  are  seeking,  when  all 
municipal  accounts  shall  be  standardized  and  all  municipal  statistics 
can  be  pronounced  good  because  they  are  comparable.  The  Bureau 
of  the  Census  may  well  be  proud  of  its  handiwork;  but  it  knows  too 
well  the  nature  and  difficulty  of  the  problem  with  which  it  has  to  deal 
to  claim  utter  perfection  for  the  bulletin  tables.  The  Bureau  is 
desirous  to  make  its  tables  for  1904  more  useful  and  valuable  than 
its  tables  for  1902  and  1903.  I  am  glad  of  that,  for  even  unexcep- 
tionable statistics  may  be  put  to  obnoxious  uses  by  the  unwary  and 
inexpert  laymen,  by  whom  and  for  whom,  in  the  last  analysis,  com- 
parisons between  cities  and  city  governments  are  made.  For 
instance,  in  the  last  municipal  campaign  in  Boston,  as  I  had  occasion 


UNIFOKM    MUNICIPAL   ACCOUNTING.  21 

to  know,  Bulletin  20  was  a  magazine  in  which  all  parties  in  the  fray 
found  missiles  and  ammunition  suitable  for  their  purpose.  One  of 
our  religious  papers,  on  the  strength  of  figures  cited  by  a  campaign 
orator,  proclaimed  the  total  depravity  of  Boston's  city  government. 
The  religious  editor  declared  that  Boston  was  now  the  "  worst  gov- 
erned city  in  Christendom/'  because  it  had  been  shown  that  no  other 
city  had  so  large  a  per  capita  burden  of  debt.  Had  the  orator  or  the 
editor  been  thoroughly  familiar  with  Bulletin  20  he  would,  as  a  con- 
cession to  common  honesty,  have  been  obliged  to  apply  his  epithet 
to  another  highly  esteemed  Massachusetts  city  whose  per  capita  debt 
in  1903  was  $39.99  greater  than  Boston's. 

It  seems  to  me  that  the  American  public  was  never  so  willing,  not 
to  say  anxious,  to  have  full  and  accurate  information  respecting  the 
financial  administration  of  our  cities  placed  at  its  disposal  as  at  the 
present  time.  The  facts  brought  to  light  by  the  Armstrong  Committee 
in  New  York,  with  regard  to  the  juggling  of  figures  and  the  falsification 
of  reports  by  those  whom  we  have  been  taught  to  revere  as  the  highest 
type  of  business  probity  and  efficiency,  are  likely  to  weaken  for  some 
time  to  come  the  force  of  the  argument,  recently  so  popular,  namely, 
that  the  salvation  of  municipal  government  in  the  United  States  could 
best  be  secured  by  the  simple  adoption  under  business  men  of  busi- 
ness methods  in  administration.  Recent  revelations,  now  that  the 
cash  nexus  between  the  world  of  business  and  the  world  of  graft  has 
been  so  clearly  shown,  are  likely  to  give  new  force  and  meaning  to  the 
discussion  of  all  questions  bearing  on  the  truthfulness,  the  honesty, 
and  the  comparability  of  financial  reports — of  the  reports  of  private 
and  public  corporations  no  less  than  those  of  municipal  corporations. 
Stranger  things  have  happened  than  would  be  involved  in  the 
demand,  which  may  possibly  arise,  that  the  reports  of  the  great  busi- 
ness corporations  of  the  country  shall  be  as  well  conceived  and  hon- 
estly rendered  as  are  those  of  our  most  progressive  cities. 

The  Director  of  the  Census  alluded  to  the  extraordinary  and  grow- 
ing enthusiasm  which  has  recently  declared  itself  for  the  municipal 
ownership  of  public  utilities.  The  question  involved  in  municipal 
ownership  and  operation  is  a  vital  and  urgent  one,  and  can  be  neither 
blinked  nor  shirked.  The  decisive  factor  in  it  for  most  unprejudiced 
men  is  the  underlying  question  of  cost  of  efficient  management.  The 
demand  for  financial  statistics  touching  the  cost  of  construction  and 
operation  of  waterworks,  gas  works,  and  electric  lighting  plants  under 
private  as  contrasted  with  public  ownership  and  management  is 
already  loud  and  insistent.  Fortunately  the  national  association  of 
the  managers  of  the  principal  public  utilities,  proposed  to  be  munic- 
ipalized, have  undertaken  to  standardize  the  forms  of  their  operating 
accounts  and  their  financial  statements.  Nevertheless  much  remains 
to  be  done.  It  is  highly  appropriate  that  the  Census  Bureau  should 


22  UNIFORM 'MUNICIPAL  ACCOUNTING. 

ask  this  conference  to  consider  the  question  how  the  accounts  of  mu- 
nicipal industries  and  public  service  corporations  should  be  kept,  in 
order  that  the  cost  of  construction  and  operation  and  the  value  of 
service  rendered  may  be  presented  intelligently. 

The  situation,  in  the  light  of  recent  events  and  of  present  condi- 
tions, is  one  of  unusual  gravity  and  interest.  It  affords  the  Bureau 
of  the  Census,  and  all  who  are  privileged  to  cooperate  with  it,  a  great 
opportunity  for  constructive  work  and  patriotic  service.  I  con- 
gratulate this  conference  on  the  circumstances  under  which  it  meets. 

The  CHAIRMAN.  One  of  the  leading  photographers  of  this  city 
desires  to  have  a  chance  of  taking  a  photograph  of  the  conference  at 
the  close  of  this  session.  If  it  is  desired,  we  will  meet  on  the  north 
steps  of  the  Treasury  building  immediately  after  the  close  of  this 
morning's  session.  Is  there  any  objection  with  reference  to  this? 
If  not,  we  will  leave  the  matter  until  later. 

It  was  expected  that  Mr.  Player,  of  St.  Louis,  would  open  the  dis- 
cussion with  a  paper  on  the  subject  of  "  Publicity."  I  heard  that  Mr. 
Player  was  preparing  this  paper;  he  so  informed  one  of  our  agents 
who  stopped  in  that  city  a  short  time  ago.  It  has  not  as  yet  appeared, 
and  it  has  been  suggested  by  a  number  of  those  present  that  we 
depart  from  the  order  of  the  programme  as  laid  out.  This  morning, 
then,  we  will  take  up  a  paper  on  Census  Bulletin  20,  prepared  by  my- 
self, and  that  will  open  the  way  for  certain  discussions  which  quite  a 
number  of  the  members  here  desire  to  present,  and  if  there  is  no 
objection  to  this  modification  of  the  programme,  we  will  have  the 
paper.  I  will  ask  Mr.  Upham,  of  Cambridge,  Mass.,  to  take  the  chair. 

(Mr.  Upham  took  the  chair.) 

Mr.  POWERS.  In  making  the  arrangements  for  the  second  confer- 
ence on  uniform  classification  of  municipal  accounts,  at  the  recom- 
mendation of  the  committee  of  distinguished  gentlemen  appointed  by 
the  first  conference  as  an  advisory  committee,  I  was  requested  to  pre- 
pare a  brief  paper  summing  up  the  experiences  of  the  Bureau  of  the 
Census  in  the  preparation  of  Bulletin  20,  and  the  conclusions  of  that 
Office  with  reference  to  the  present  status  of  the  problems  concerning 
comparable  municipal  statistics. 

I  can  not  enter  upon  any  discussion  of  this  subject  without  express- 
ing the  obligations  of  the  Bureau  of  the  Census  and  of  myself,  per- 
sonally, to  the  financial  officials  of  every  city  of  the  country  containing 
25,000  inhabitants.  In  the  collection  of  the  information  for  Census 
Bulletin  20  those  gentlemen,  so  many  of  whom  I  am  glad  to  welcome 
here  to-day  and  make  their  personal  acquaintance,  have  rendered 
very  pleasant  the  difficult  and  perplexing  labors  of  the  Census  agents 
and  those  in  charge  of  its  work  here  in  Washington.  By  uniform 
courtesy  to  the  agents  of  the  Office,  by  doing  all  that  has  been  in  their 
power  to  cooperate  and  to  assist  them  in  their  studies,  they  have  ren- 


UNIFORM    MUNICIPAL   ACCOUNTING.  23 

dored  it  possible  for  the  Bureau  of  the  Census  to  make  a  good  begin- 
ning in  a  subject  which  is  attracting  the  attention  of  students  of 
municipal  conditions  and  municipal  problems  throughout  the  world. 
Those  gentlemen,  charged  with  the  high  and  honorable  duty  of  safe- 
guarding the  financial  interests  of  our  American  municipalities,  know 
something  of  the  great  difficulties  of  making  just  comparisons  be- 
tween the  financial  management  of  their  cities.  They  know  something 
of  the  differences  in  methods  of  municipal  organization  and  municipal 
bookkeeping,  and  the  methods  of  conducting  municipal  business. 
Having  this  knowledge,  they  have  been  the  kindest  of  critics  and  most 
cordial  in  their  cooperation  with  the  Bureau  of  the  Census  in  its 
studies  and  statistical  investigations.  Whatever  credit  for  good 
comparable  statistics  may  be  given  to  Bulletin  20  and  its  successors, 
a  great  share  belongs  to  these  city  officials.  Its  defects,  which  we 
hope  to  correct,  can  not  be  removed  without  the  continued  coopera- 
tion of  the  same  painstaking  officials.  It  is  the  recognition  of  this 
fact  that  gives  rise  to  this  second  conference,  and  the  presence  of  so 
many  from,  all  parts  of  our  common  country  evidences  the  continued 
interest  of  all  in  this  subject. 

Census  Bulletin  20,  containing  statistics  of  cities  of  over  25,000 
inhabitants,  has  now  been  before  the  public  nearly  a  year.  That  bul- 
letin presented  information  for  the  fiscal  years  1902  and  1903.  A 
somewhat  similar  publication,  but  including  only  financial  statistics, 
will  soon  be  completed  for  the  fiscal  year  1904.  The  Tenth  and 
Eleventh  censuses  collected  the  data  therefor  and  published  certain 
statistics  of  all  cities.  In  1898  Congress  authorized  the  Commis- 
sioner of  Labor  annually  to  collect  similar  statistics  for  cities  con- 
taining over  30,000  inhabitants,  and  later  authorized  the  Bureau  of 
the  Census  to  collect  statistics  of  wealth,  debt,  and  taxation,  and 
social  statistics  of  all  cities.  To  avoid  duplication,  the  collection  of 
social  statistics  of  cities  of  30,000  inhabitants  and  over  was  transferred 
in  1903  from  the  Bureau  of  Labor  to  the  Bureau  of  the  Census.  In 
the  preparation  of  these  statistics  the  duty  of  collecting  and  arranging 
the  financial  data  was  given  to  the  division  in  charge  of  the  statistics 
relating  to  wealth,  debt,  and  taxation,  of  which  the  speaker  is  the  chief 
statistician.  The  other  statistics  were  given  in  charge  of  Hon. 
William  C.  Hunt,  chief  statistician  for  the  division  of  population. 

The  scope  of  the  report  authorized  to  be  included  in  the  designation 
of  social  statistics  of  cities  is  spoken  of  and  described  in  Bulletin  20. 
Permit  me  to  give  the  following  extract  therefrom: 

The  classes  of  data  to  be  included  in  the  report  on  statistics  of  cities  are  not  explicitly 
denned  either  in  the  law  instituting  the  inquiry  conducted  by  the  Commissioner  of  Labor  or 
in  that  providing  for  the  statistical  investigations  of  the  Census.  In  the  one  the  data  are 
referred  to  as  "official  statistics ;"  in  the  other  as  "social  statistics." 


24  UNIFORM    MUNICIPAL   ACCOUNTING. 

Congress  seems  to  have  expected  that  the  "official  statistics"  of  cities  which  the  Com- 
missioner of  Labor  was  authorized  to  compile  and  publish  would  comprise  the  data  commonly 
published  in  the  official  city  reports  and  would  be  compiled  directly  from  those  reports. 
But  for  reasons  already  stated  (see  page  1)  it  was  found  impracticable  to  obtain  satisfactory 
results  by  that  method,  and  accordingly  a  schedule  of  inquiries  was  prepared  and  agents 
were  sent  to  the  various  cities  to  collect  information  from  city  officials.  Naturally  and 
appropriately  it  was  such  information  as  could  be  derived  from  official  records.  The  scope 
of  the  inquiry  conducted  by  the  Commissioner  of  Labor  is  best  indicated  by  the  list  of  tables 
published  in  his  last  report. 

TABLE  I. — Incorporation,  population,  and  area. 

II. — Dates  of  ending  of  years  covered  by  the  investigation. 
III. — Police,  retail  liquor  saloons,  and  arrests,  by  causes. 
IV. — Firemen,  fire  equipment,  and  property  loss  from  fires. 
V. — Marriages,  divorces,  and  births. 
VI. — Deaths,  by  causes. 

VII. — Perceptage  of  deaths  from  each  specified  cause. 
VIII. — Death  rate  per  1,000  population,  by  causes. 
IX.— Death  rate  per  1,000  population. 

X. — Area  of  public  parks  and  miles  of  streets,  sewers,  and  street  railways. 
XI. — Care  of  streets,  food  and  sanitary  inspection,  and  disposal  of  garbage  and  other 

refuse. 

XII. — Number  and  kind  of  street  lights. 
XIII.— Public  schools. 
XIV.— Public  libraries. 

XV. — Charities:  Alms  houses,  orphan  asylums,  and  hospitals. 
XVI. — Cost  of  water,  gas,  and  electric  light  plants,  owned  and  operated  by  cities. 
XVII. — Building  permits. 
XVIII. — Debt  and  legal  borrowing  limit. 

XIX. — Basis  of  assessment,  assessed  valuation  of  property,  and  taxation. 
XX. — Receipts  from  all  sources. 

XXI. — Expenditures  for  construction  and  other  capital  outlay. 
XXII. — Expenditures  for  maintenance  and  operation. 
XXIII. — Summary  of  receipts  and  expenditures. 
XXIV.— Assets. 

XXV. — Per  capita  debt,  assessed  valuation  of  property,  and  expenditures  for  mainte- 
nance. 

As  regards  the  scope  of  the  investigation  authorized  by  the  act  providing  for  the  Twelfth 
Census  and  by  the  permanent  census  act,  it  is  to  be  presumed  that  Congress,  in  specifying 
the  special  inquiries  to  be  conducted  by  the  Census,  intended  that  these  inquiries  should 
include  substantially  the  same  topics  as  they  included  at  previous  censuses. 

Understanding  the  law  relating  to  this  branch  of  the  subject  as 
thus  stated  in  the  bulletin,  the  two  divisions  entered  upon  the  labor 
of  collecting,  classifying,  and  presenting  the  data,  with  the  aim  of 
making  the  resulting  publication  as  useful  to  the  public  as  possible. 
At  a  very  early  date  it  was  perceived  that  to  be  useful  the  facts  col- 
lected must  be  arranged  in  a  comparable  form.  To  accomplish  this 
end  no  great  problems  arose,  excepting  in  the  field  of  financial  sta- 
tistics, upon  which  must  rest  as  a  basis  a  great  proportion  of  all  the 
other  statistics. 

Here  the  questions  met  with  were  numerous  and  of  considerable 
magnitude.  The  cities  of  the  several  states  collected  their  revenues 


UNIFORM    MUNICIPAL   ACCOUNTING.  25 

under  a  great  variety  of  laws,  and  those  laws  had  no  uniformity  of 
terminology.  Some  words  were  employed  by  the  statutes  of  the  sev- 
eral states  relating  to  municipal  revenues  in  a  great  number  of  ways. 
The  most  marked  instance  of  this  is  met  with  in  the  case  of  the 
so-called  franchises  and  franchise  taxes.  Under  such  circumstances 
a  comparable  presentation  of  the  statistics  of  municipal  revenues 
called  for  a  detailed  study  of  the  statutes  of  all  the  states  and  the 
ordinances  of  the  larger  cities.  The  Office  had  to  ascertain  the  sig- 
nificance which  the  city  officials  give  to  every  term  made  use  of  by 
them  in  their  treatment  of  municipal  revenues.  This  has  been  no 
easy  task.  It  has  involved  a  great  amount  of  study  by  experts. 
The  most  important  part  of  this  study  has  been  under  the  immediate 
direction  of  Prof.  Carl  C.  Plehn,  of  the  University  of  California.  The 
detailed  results  of  this  branch  of  study  have  not  as  yet  been  given  to 
the  public,  but  will  be  a  constituent  and  important  part  of  the  publi- 
cation of  the  Bureau  relating  to  "  wealth,  debt,  and  taxation."  Its 
results  have,  however,  been  reflected  in  the  analysis  of  municipal 
revenues  found  in  Bulletin  20.  That  presentation  will  be  somewhat 
improved  in  the  corresponding  bulletin  for  1904.  The  principal 
aim  kept  in  view  in  making  this  presentation  of  municipal  revenues 
is  to  lay  a  basis  for  a  scientific  and  intelligent  study  and  comparison 
of  the  sources  of  municipal  income,  and  of  the  laws  governing  the 
same  throughout  the  country;  it  is  to  show  the  amount  derived  by 
each  city  from  each  and  every  source  of  revenue.  It  is  designed 
to  give  even  greater  detail  for  this  branch  of  the  subject  in  future 
publications. 

We  aim  to  give,  under  general  property  tax,  exhibits  of  the  amounts 
collected  as  the  result  of  general  and  special  levies  and  to  show  ulti- 
mately for  every  large  city  the  amount  from  every  form  of  taxation, 
license,  privilege,  and  other  sources  of  revenue.  To  fully  realize 
this  aim  has  involved  not  only  a  careful  and  scientific  study  of  all 
the  laws  and  ordinances  relating  to  municipal  revenue,  to  which 
Professor  Plehn  has  given  his  attention  for  a  considerable  time,  but 
the  Office  has  had  to  train  all  its  clerks  to  master  the  practical  work- 
ings of  these  laws  everywhere,  and  to  separate  and  assign  to  its 
appropriate  subdivision  the  receipts  from  each  class  of  revenue. 
This  is  the  hardest  part  of  the  undertaking.  When  once  this  training 
is  completed  and  the  Office  force  has  mastered  thoroughly  the  intri- 
cate details  of  the  operation  of  all  the  revenue  laws  throughout  the 
country,  this  part  of  the  statistics  of  cities  can  be  placed  on  a  truly 
comparable  basis  and  given  a  form  that  will  be  of  inestimable  value 
to  all  interested  in  the  revenue  systems  of  our  cities  and  the  improve- 
ment of  methods  of  public  taxation. 

In  making  this  study  and  arranging  this  branch  of  its  statistics 
the  Bureau  of  the  Census  is  moved  by  the  conviction  that  no  class 


26  UNIFOKM    MUNICIPAL   ACCOUNTING. 

of  public  questions  is  as  important  as  that  gathering  around  public 
taxation,  and  no  class  of  statistics  can  be  of  greater  importance  than 
that  which  forms  the  basis  for  an  intelligent  study  of  the  various 
methods  and  schemes  of  taxation  that  are  now  in  force  throughout 
the  country. 

In  arranging  its  classification  of  municipal  revenues  and  adopting 
its  nomenclature  given  in  Bulletin  20,  the  Bureau  has  sought  to  lay 
the  basis  for  future  studies  of  all  the  great  questions  of  municipal 
revenue  and  public  taxation.  To  illustrate  some  of  these  problems 
that  were  kept  in  mind  in  arranging  our  classification  of  public  rev- 
enue, I  will  refer  to  public  service  corporations,  such  as  those  operat- 
ing street  cars,  electric  lighting  plants,  gas  works,  telephones,  etc. 
The  plans  of  the  Office  involve  giving  to  the  public  a  mass  of  infor- 
mation concerning  these  corporations  and  their  relation  to  the  public 
not  previously  available.  Let  me  state  these  plans  for  street  rail- 
ways and  their  relations  to  the  statistics  embodied  in  Bulletin  20. 

For  1905  we  expect  to  give  to  the  public  estimates  of  the  com- 
mercial value  of  the  street  railways  of  all  our  cities,  based  upon  the 
market  value  of  the  securities  issued  by  the  corporations  operating 
the  same.  These  estimates  will  be  made  along  the  lines  illustrated 
by  Census  Bulletin  21,  for  steam  railways  of  the  United  States. 
We  hope  to  give,  along  with  this  information,  a  statement  in  detail 
for  each  city  of  the  taxes  paid  by  these  railroads  as  general  property 
taxes,  license  taxes,  gross  revenue  taxes,  etc.  We  shall  also  show 
what  amounts  paid  by  these  corporations  can  properly  be  classified 
as  payments  for  " public  privileges"  as  apart  from  taxes.  These 
payments  for  " public  privileges"  are  in  character  the  same  as  " rental 
for  private  property."  The  study  of  Bulletin  20  and  its  successors 
will  show  a  few  cities  receiving  a  small  income  from  privileges,  and 
others,  nothing.  There  are  no  data  at  hand  showing  whether  in 
any  city  these  corporations  are  paying  their  just  share  of  the  burdens 
of  taxation.  To  throw  all  light  attainable  upon  the  subject  is  the 
aim  of  the  Census  Bureau  in  its  plans  for  these  statistics.  It  was 
impossible  to  enter  this  broad  field  in  detail  until  we  had  mastered 
the  knowledge  of  local  revenue  systems  and  trained  our  clerks  to  an 
intelligent  discrimination  with  reference  thereto.  This  study  will 
also,  in  connection  with  other  public  service  corporations,  lay  the 
foundation  for  an  intelligent  investigation  of  the  problems  and 
questions  concerning  municipal  ownership  and  operation  of  all  public 
utilities.  By  assisting  in  laying  a  correct  basis  for  comparable 
financial  statistics  you  render  it  possible  for  the  early  preparation 
of  an  intelligent  study  of  all  questions  relating  to  public  utilities. 
In  many  of  your  cities  these  questions  are  very  live  ones  to-day. 
In  all,  they  are  to  be  more  so  in  the  future.  We  ask  you  to  cooper- 
ate with  us  in  making  our  statistics  of  municipal  revenues  truly 


UNIFOKM    MUNICIPAL   ACCOUNTING.  27 

comparable  and  on  a  basis  that  will  open  the  flood  gates  of  light 
thereupon. 

To  furnish  statistics  of  municipal  revenues — such  as  maybe  valuable 
to  the  student — is  one  aim  of  the  Bureau  of  the  Census.  In  like 
manner  the  Bureau  seeks  to  make  its  statistics  of  payments  for 
expenses  and  outlays,  and  its  exhibit  of  public  debt,  as  comparable 
as  practicable  for  the  various  cities.  Comparability  in  these  fields 
involves  different  problems  from  those  met  with  in  the  domain  of 
revenue.  As  the  basis  of  its  work  in  this  field  the  Bureau  of  the 
Census  has  given  much  study  to  the  subject  of  classification  and 
nomenclature,  so  that  its  employees  working  upon  the  books  of  dif- 
ferent cities  might  work  in  harmony  along  the  same  and  comparable 
lines.  The  classification  and  nomenclature  adopted  seems  to  be  a 
good  beginning,  and  yet  may  I  say  the  Office  looks  upon  it  only  as  a 
beginning?  All  that  has  been  accomplished  merely  points  out  the 
way  for  future  improvement.  The  tables  of  Bulletin  20  disclose  a 
wide  difference  in  state  laws  under  which  cities  are  operated,  as 
well  as  variations  in  the  relations  which  the  individual  city  bears  to 
other  civil  divisions.  These  cities  show  many  other  points  at  which 
the  figures  of  the  Census  are  not  yet  truly  comparable.  Such  figures 
must  therefore  be  used  with  great  care  at  present,  or  false  deductions 
may  be  drawn  from  them,  as  has  been  the  case  in  many  instances 
that  have  come  to  the  attention  of  the  Office.  If  the  Bureau  felt  at 
any  time  that  all  the  problems  relating  to  the  comparability  of  munic- 
ipal statistics  had  been  solved,  it  would  not  have  called  this  confer- 
ence. But  the  extreme  importance  of  the  subject,  and  the  progress 
already  attained  by  the  cooperation  and  kindness  of  the  city  officials 
throughout  the  country,  has  led  to  the  belief  that  as  a  result  of  this 
conference  there  will  come  suggestions  that  will  open  the  way  for 
making  these  statistics  of  much  greater  service  to  the  student  of 
municipal  government  than  has  been  attained  in  the  past. 

One  of  the  most  perplexing  problems  relating  to  the  comparability 
of  these  statistics  rose  out  of  the  different  organizations  of  cities  and 
their  different  relations  to  such  governmental  functions  as  those  con- 
nected with  schools,  courts,  charities,  etc.  In  some  cities  the 
schools  are  managed  by  the  city  government  proper;  in  others,  by 
what  is  in  reality  an  independent  municipality  or  school  district. 
We  have,  so  far  as  practicable,  combined  the  statistics  of  these 
school  districts  with  those  of  the  city  government  proper.  Some  of 
the  best  and  most  thoughtful  men  in  the  country  take  exception  to 
this  treatment.  I  have  asked  them  to  voice  their  objections  here 
to-day.  A  greater  number  criticise  our  statistics  from  the  opposite 
side  and  would  have  us  bring  into  the  same  compilation,  at  least  for 
the  larger  cities,  the  county  accounts.  This  is  especially  suggested 
for  such  cities  as  Chicago.  This  latter  suggestion  comes  from  one  of 


28  UNIFOKM    MUNICIPAL   ACCOUNTING. 

the  foremost  students  of  municipal  affairs  in  our  country.  Further, 
the  question  is  raised  as  to  the  item  of  interest  on  debt  in  our  sta- 
tistics of  schools,  or  police  and  fire  departments.  The  question 
raised  and  suggestions  offered  disclose  a  wide  field  for  honest  discus- 
sion and  investigation.  The  suggestions  would  be,  the  source  of 
discouragement  but  for  the  assertion  which  comes  with  nearly  all, 
that  we  have  succeeded  in  laying  a  correct  general  foundation,  and 
all  that  is  now  needed  is  attention  to  details  to  accomplish  the 
results  for  which  all  students  were  looking  and  looking  in  vain  until 
the  appearance  of  Bulletin  20. 

The  Bureau  of  the  Census  aims  only  to  make  these  statistics  the 
most  perfect  medium  of  advancing  the  common  interest  of  the 
millions  dwelling  within  our  large  municipalities  and  of  furnishing 
information  in  the  most  available  form  for  solving  the  many  per- 
plexing problems  relating  to  municipal  government  and  municipal 
well-being.  How  to  build  upon  the  foundation  laid  to  accomplish 
these  results  is  the  problem  upon  which  we  are  all  working.  The 
large  and  representative  gathering  here  assembled  from  our  greatest 
cities  shows  the  popular  interest  which  those  cities  and  their  officials 
take  in  this  work,  and  I  repeat  that  whatever  success  has  attended 
the  Census  labors  in  this  field  is  due,  in  a  very  large  measure,  to  the 
hearty  cooperation  of  the  city  officials  throughout  the  country. 
Improvement  in  this  work  will  depend  largely  upon  the  frank  criti- 
cisms and  suggestions  and  cooperation  of  all  in  the  future. 

The  city  officials  here  present  are  more  or  less  familiar  with  the 
processes  of  collecting  these  data.  Our  agents  visit  the  cities  con- 
cerned and  from  the  official  books  of  record  compile  our  information. 
They  arrange  this  information  on  schedules  prepared  for  the  purpose 
and  accompany  the  same  with  notes  and  explanations.  It  is  the 
design  of  the  Office  to  have  the  accompanying  notes  as  full  and  lucid 
as  possible,  so  as  to  set  forth  the  exact  character  of  any  exceptional 
transaction  or  account  shown  on  the  books  of  the  several  cities.  The 
object  of  these  notes  is  to  enable  the  Office  to  follow  in  detail  the 
field  agent's  work,  to  check  it  with  printed  city  reports,  to  know  exactly 
why  any  entry  included  on  the  schedule  is  classified  differently  from 
what  is  shown  on  the  city  books,  and  so  to  enable  the  Office  to  make 
such  changes  on  the  schedule  as  the  more  perfect  study  suggests. 
The  field  agents  are  told  that  full  notes  of  this  kind  are  more  to  be 
desired  than  a  perfect  classification.  They  are  so  considered,  since 
correct  detailed  information  can  assure  correct  classification  as  well 
as  the  correction  of  all  errors,  while  the  Office  can  not  be  sure  of  the 
work  of  even  the  best  agent  without  a  detailed  check  upon  his  work, 
which  is  afforded  by  such  notes.  Each  year  the  checks  upon  the 
field  agents  of  this  sort  are  increased,  and  in  turn  each  year  the 
clerks  are  furnishing  of  their  own  volition  more  information  that  is 


UNIFORM    MUNICIPAL   ACCOUNTING.  29 

available  for  making  a  complete  and  comparable  report.  With 
schedules  so  prepared  and  accompanied  with  notes  the  office  work 
begins.  These  schedules  and  notes  are  critically  reviewed  and 
compared  with  the  printed  city  report  that  is  at  hand.  The  work  of 
one  year  is  compared  in  detail  with  that  for  the  same  city  for  pre- 
ceding years,  and  the  reasons  for  all  variations  and  improvements 
noted.  Each  year,  through  the  devoted  and  earnest  labors  both  of 
the  field  force  and  the  office  workers,  more  and  greater  devices  are 
introduced  for  detecting  and  correcting  any  errors  that  may  be  made 
by  the  field  agent,  and  also  for  enabling  the  field  agents  and  the 
Office  properly  to  present  a  true  exhibit  of  the  city's  financial  con- 
dition in  a  form  comparable  with  that  of  other  cities.  To  city  officials 
who  are  interested  in  this  branch  of  the  work  we  should  be  pleased 
to  show  in  detail  at  the  close  of  the  conference  all  the  work  thus  done 
on  the  schedules  for  their  individual  cities. 

You  are  all  familiar  with  the  reception  accorded  to  Bulletin  20. 
The  public  has,  it  seems,  given  full  credit  to  the  sincere  effort  of  the 
Bureau  of  the  Census  to  give  comparable  and  valuable  statistics 
relating  to  our  municipalities.  It  has  recognized  the  many  difficul- 
ties in  the  way  of  preparing  truly  comparable  statistics,  and  thus 
has  been  lenient  to  the  imperfections  of  the  report.  A  great  many 
city  officials,  professors  of  political  economy  and  finance  in  our 
universities,  and  other  students  of  municipal  affairs  have  expressed 
their  appreciation  of  the  report  and  of  the  progress  made  by  the 
Bureau  of  the  Census  in  this  very  difficult  field  of  comparable 
statistics.  The  report  has  been  used  as  the  basis  of  political 
addresses  in  municipal  contests  and  a  basis  of  modifying  the  many 
items  of  the  city  budget  in  a  large  number  of  cities  all  over  the 
country.  Some  of  the  people  thus  employed  have  not  observed  the 
statement  of  the  text  pointing  out  the  limitations  under  which  its 
figures  are  comparable,  and  so  at  times  wrong  deductions  have  been 
made  from  these  figures.  But  this  sort  of  error  will  always  be  made 
in  the  use  of  any  statistical  publication,  and  such  use  will  continue 
until  the  users  of  statistics  are  made  inerrant.  This  is  more  neces- 
sary even  than  infallibility  of  statistics.  The  lessons  borne  home  to 
the  Office  in  the  preparation  of  Bulletin  20,  and  by  its  popular  recep- 
tion and  use,  I  may  briefly  summarize  as  follows: 

No  branch  of  national  statistics  is  of  such  supreme  importance  as 
those  surrounding  the  financial  reports  of  cities,  of  which  the  founda- 
tion is  now  securely  laid  in  Bulletin  20.  No  branch  of  statistics 
presents  so  many  difficulties  in  securing  perfect  comparability,  and 
hence  none  requires  a  wider  cooperation,  more  lively  interest,  or  more 
frank  and  complete  discussion  on  the  part  of  all  interested  therein. 
The  Census  Bureau  to  improve  its  work  must  know  what  all  of  you 
are  saying  about  its  work  when  you  are  comparing  it  with  your  own 


30  UNIFOKM    MUNICIPAL    ACCOUNTING. 

reports  and  with  those  of  other  cities.  It  should  know  the  difficulties 
you  meet  with  in  trying  to  make  honest  and  candid  deductions  from 
it  with  reference  to  the  comparative  cost  of  any  branch  of  service  in 
your  city  and  that  of  others.  If  the  Census  Bureau  is  kept  con- 
stantly posted  upon  these  points,  the  Bureau  can  readily  correct  in 
future  publications  the  real  errors  found  in  this.  Of  course  some 
suggestions  will  surely  be  made  of  which  the  Bureau  can  not  make 
use,  since  some  are  directly  the  opposite  of  others. 

I  have  stated  that  the  Census  Bureau  must  be  wide  awake  to  the 
suggestions  of  city  officials  and  all  others  interested  in  using  the 
same.  But  the  Bureau  can  go  only  a  limited  distance  in  this  direc- 
tion without  the  active  cooperation  of  the  cities  themselves  by 
standardizing  their  own  accounts.  It  is  impossible  for  the  brightest 
of  Census  agents — and  the  Office  has  some  very  capable  young  men, 
to  whose  ability,  fidelity,  and  conscientiousness  I  wish  to  bear  testi- 
mony— it  is  impossible,  I  say,  for  even  those  young  men  with  all 
their  ability  to  master  in  a  few  weeks  all  the  intricate  details  of  the 
accounts  of  a  large  city  unless  they  are  working  along  the  same  lines 
in  a  sympathetic  way  with  the  city  officials.  They  must  be  intel- 
ligently laboring  upon  the  same  problems,  else  the  Census  Bureau 
will,  at  times,  reach  results  not  exactly  correct;  hence  the  absolute 
necessity,  before  fully  comparable  statistics  are  secured,  that  cities 
and  the  Census  Bureau  should,  within  reasonable  limits,  standardize 
the  work  by  a  common  basis  of  classified  accounts.  Great  progress 
has  been  made  along  this  line  within  the  last  three  years,  but  there 
remains  much  to  be  hoped  for  in  the  future. 

This  does  not  necessarily  mean  the  adoption  of  the  same  system  of 
bookkeeping  for  all  cities,  but  the  insertion  into  all  systems  of  certain 
common  terms  and  the  uniform  classification  and  grouping  of 
accounts.  The  Census  does  not  recommend  any  special  system  of 
accounts.  That  is  something  for  the  individual  cities  to  settle 
for  themselves.  It  is  a  subject  well  worthy  the  consideration  of 
such  a  capable  and  intelligent  body  of  officials  as  is  here  assembled, 
but  it  is  one  upon  which  the  cities  should  be  guided  by  their  mutual 
experience  in  the  work  of  safeguarding  the  public  interest.  But 
accounts  under  any  system  can  be  standardized.  They  should  be 
so  standardized,  and  then  you  will  not  have  to  wait  for  Census 
reports  to  make  comparisons  with  other  cities.  You  can  make 
comparisons,  in  many  cases,  better  direct  from  city  reports  than 
from  the  census.  This  should  be  the  aim  of  all  concerned.  If  it  is 
once  secured,  the  statistics  will  be  more  valuable  than  now  and  the 
work  of  the  Census  will  become  a  mere  formal  and  incidental  one. 
May  I  say  that  when  that  end  is  attained,  the  real  work  of  the 
Census  will  have  been  accomplished  ? 


UNIFORM    MUNICIPAL   ACCOUNTING.  31 

In  transferring  the  statistics  of  cities  to  the  Bureau  of  the  Census 
the  Commissioner  of  Labor  recommended  that  the  statistics  be 
collected  and  compiled  only  once  in  two  years.  The  Bureau  of  the 
Census  gave  in  Bulletin  20  its  enlarged  and  improved  financial 
statistics  along  with  general  statistics  on  the  same  lines  as  those 
included  in  the  bulletin  of  the  Department  of  Labor.  For  1904  the 
Census  bulletin  omits  these  general  statistics,  moved  thereto  by  the 
consideration  of  the  same  facts  which  led  to  the  recommendation  of 
Colonel  Wright,  the  Commissioner  of  Labor,  as  stated  above.  The 
Bureau  of  the  Census  does  not  wish  to  publish  any  statistics  for  which 
there  is  no  real  demand  and  which  are  not  sufficiently  useful  to  the 
general  public  to  warrant  the  cost  of  the  compilation  and  publication. 
It  is  hoped  that  there  may  be  at  this  conference  a  complete  statement 
of  the  reasons  that  present  themselves  to  those  here  present  with 
reference  to  the  publication  of  the  general  statistics  of  Bulletin  20. 
These  statistics  can  readily  be  enlarged  and  improved.  The  chief 
statistician,  Mr.  Hunt,  who  had  the  same  in  charge  for  Bulletin  20, 
has  made  very  intelligent  and  painstaking  study  and  plans  for  such 
improvement,  and  the  Bureau  of  the  Census  only  desires  to  know 
how  far  there  is  a  popular  demand  and  use  for  these  other  statistics. 
If  there  is  a  use  that  justifies  the  annual  publication  in  an  enlarged 
and  improved  form,  the  Office  wishes  to  compile  them  annually  in 
the  future.  If  all  needs  and  desires  can  be  satisfied  by  a  publication 
once  in  every  two  or  five  years,  then  the  Office  wishes  to  issue  the 
same  with  that  frequency  only. 

I  understand  that  there  are  some  here  who  wish  to  discuss  certain 
phases  of  the  Census  statistics  relating  to  revenue  and  taxation. 
If  Comptroller  Metz  is  in  the  room  and  has  his  paper  upon  the  sub- 
ject of  taxes  and  revenue,  I  should  be  pleased  to  have  him  present  it. 

Mr.  METZ.  I  did  not  intend  to  inflict  this  paper  upon  you  so  early 
in  the  proceedings,  and  I  might  add  that  I  am  a  new  man  with  a  new 
job.  I  have  not  all  the  details  as  yet,  and  I  doubt  if  I  shall  have 
them  during  my  four  years'  term.  I  had  to  ask  Mr.  Maclnnes,  of 
our  accounting  bureau,  to  dig  out  the  facts  for  me.  The  paper  relates 
especially  to  the  personal  tax  proposition. 

(Mr.  Metz's  paper  follows.) 

THE  CITY  OF  NEW  YORK  CONTRASTED  WITH  OTHER  AMERICAN  CITIES  IN  THE  LIGHT  OF 
STATISTICS  PREPARED  BY  THE  UNITED  STATES  CENSUS;  TOGETHER  WITH  A  REVIEW  OF 
CERTAIN  PHASES  OF  TAXATION,  ASSESSMENTS,  ETC. 

The  magnitude  of  the  business  carried  on  by  the  municipal  corporation  of  the  city  of 
New  York  and  the  stupendous  operations  conducted  yearly  by  said  city  in  the  education 
of  its  people,  the  protection  of  life  and  property,  and  the  care  of  the  public  health,  together 
with  the  manifold  duties  devolving  on  the  administration,  are  to  some  extent  indicated 
in  the  comprehensive  report  prepared  and  issued  by  the  Bureau  of  the  Census  for  the 

27311—06 3 


32  UNIFOKM    MUNICIPAL   ACCOUNTING. 

years  1902  and  1903,  the  financial  statistics  relating  to  which  were  tabulated  under  the 
supervision  of  Doctor  Powers. 

In  the  report  referred  to  I  find  that  the  tabulations  deal  with  175  cities  having  a  popu- 
lation of  from  25,000  upward.  The  Census  Bureau  in  its  work  of  tabulation  has  classified 
these  175  cities  into  four  separate  groups,  the  first  of  which  consists  of  New  York  and  the 
13  next  largest  cities  in  the  United  States,  viz,  Chicago,  Philadelphia,  St.  Louis,  Boston, 
Baltimore,  Cleveland,  Buffalo,  San  Francisco,  Pittsburg,  Cincinnati,  Milwaukee,  Detroit, 
and  New  Orleans.  Of  this  group  it  is  shown  that  the  population  of  New  York  city  is 
upward  of  32  per  cent  of  the  whole,  while  her  expenditures  for  the  year  1903  were  fullyv 
53  per  cent  of  the  group  of  14  cities;  or  in  other  words,  the  expenditures  by  the  city  of 
New  York  during  the  year  1903  were  greater  than  the  combined  expenditures  of  the  next 
13  largest  cities  of  the  country.  The  Census  Bureau's  tables  also  show  that  of  the  175 
cities,  the  expenditures  by  the  city  of  New  York  were  upward  of  34  per  cent  of  the  grand 
aggregate;  that  is  to  say,  fully  one-third  of  the  entire  expenditures  by  175  cities  through- 
out the  United  States  for  current  management,  permanent  improvements,  etc.,  during  the 
year  1903  was  made  by  the  city  of  New  York.  The  grand  aggregate  of  transactions  regarded 
as  payments  by  the  city  of  New  York  during  the  year  1903  was  upward  of  $326,000,000. 

These  figures  are  cited  in  the  first  instance  as  giving  an  intimation  of  the  enormous 
task  which  the  accounting  system  in  the  comptroller's  office  has  to  meet  and  provide  for ; 
and  in  the  second  instance  as  an  illustration  of  how  readily  significant  comparisons  can 
be  made  of  the  expenditures  (and  the  remark  applies  equally  to  receipts)  by  the  large 
number  of  cities  the  activities  of  which  have  been  reviewed  in  the  very  comprehensive 
work  and  report  of  the  Census  Bureau. 

In  that  part  of  the  report  dealing  with  the  financial  statistics  the  tables  begin  with  a 
general  statement  showing  the  aggregate  expenditures  by  the  several  cities,  developing 
in  following  tables  the  general  classification  of  what  the  aggregate  expenditures  consists, 
and  an  examination  of  these  developments  shows  that  of  the  first  group  of  14  cities  the 
corporate  expenditures  as  distinguished  from  those  classified  as  -«f  a  temporary  character, 
to  wit,  the  reduction  of  debt,  refunds  of  moneys,  etc.,  consisted  of  upward  of  $340,000,000, 
of  which  New  York's  share  was  49  per  cent. 

In  the  table  dealing  with  salaries  and  wages  we  find  that  New  York  has  apparently  not 
been  so  generous  as  some  of  ihe  other  cities;  because  while  her  ratio  of  the  total  expenses 
of  these  14  cities  was  53  per  cent  of  the  aggregate  and  49  per  cent  of  the  net,  yet  of  the 
total  amount  paid  by  said  cities  for  salaries  and  wages  New  York's  share  was  only  43 
per  cent. 

The  amount  expended  during  1903  for  public  education  in  New  York  city  was  close 
to  $23,000,000.  In  this  connection  it  may  be  interesting  to  note  that  during  1905  the 
amount  expended  by  New  York  city  for  education  was  more  than  twice  greater  than  the 
amount  expended  for  police  purposes — $28,000,000  against  $12,400,000;  while  in  1895, 
just  one  decade  earlier,  the  expenditures  by  the  then  city  of  New  York  for  police  purposes 
and  for  education  were  practically  parallel.  This  latter  fact,  to  my  mind,  when  contrasted 
with  the  former,  speaks  volumes  as  to  the  continuous  strides  which  the  great  munici- 
pality is  ever  making,  despite  all  hue  and  cry  to  the  contrary,  for  better  government  and 
improved  social  conditions  within  its  borders. 

In  concluding  this  brief  reference  to  the  expenditures  by  the  city  of  New  York,  the  record- 
ing of  and  accounting  for  which  necessarily  devolve  on  the  comptroller's  office,  it  might 
here  be  fittingly  stated  that  during  1905  there  were  119,491  warrants  registered,  author- 
izing payments  for  all  kinds  of  services  performed  to  and  for  the  city,  and  there  were 
572,863  checks  issued  from  the  paymaster's  office  during  the  year.  Both  of  these  offices 
are  bureaus  of  the  department  of  finance. 

On  December  31,  1905,  the  total  funded  debt  of  the  city  of  New  York  was  $600,257,000, 
of  which  $170,530,000  was  held  as  investments  by  the  sinking  funds  of  the  city  and 
$429,727,000  was  held  by  outside  investors,  i.  e.,  the  public.  Of  said  stated  amount, 


UNIFORM    MUNICIPAL   ACCOUNTING.  33 

there  was  $6,280,000  of  special  revenue  bonds  or  short-timed  loans,  which,  pursuant  to 
law,  are  payable  from  the  succeeding  years'  tax  levy.  In  addition  to  the  large  aggregate 
of  funded  debt  stated,  there  was  also  $42,097,000  of  revenue  bonds  or  temporary  debt 
issued  in  anticipation  of  the  collection  of  taxes,  viz,  $2,640,000  in  anticipation  of  the  col- 
lection of  1902  taxes;  $8,525,000  of  1903  taxes;  $9,550,000  of  1904  taxes  still  outstanding; 
and  $21,382,000  to  be  paid  from  the  collections  of  1905  taxes.  Among  the  assets  which 
the  city  of  New  York  has  to  liquidate  these  temporary  loans  are  some  $35,000,000  of 
arrears  of  personal  taxes,  of  which  upward  of  $23,500,000  has  become  outlawed  or  other- 
wise disposed  of,  and  of  the  $11,500,000  remaining  only  a  very  small  percentage  is  in  all 
probability  collectible.  There  is  also  among  the  assets  applicable  on  collection  to  the 
liquidation  of  these  temporary  loans  upward  of  $14,000,000  of  special  franchise  taxes 
levied  under  the  statute  of  1899.  These  consist  largely  of  taxes  against  corporations 
which  resisted  payment  of  the  same  under  the  plea  that  the  law  was  unconstitutional. 
But  the  constitutionality  of  the  law  was  upheld  by  the  highest  court  in  the  state  and 
finally  by  the  Supreme  Court  of  the  United  States,  and  in  all  probability  the  tax,  with 
some  minor  modifications,  will  be  collected  ultimately,  together  with  a  considerable  amount 
of  accrued  interest  thereon. 

But  the  large  amount  of  personal  taxes  outstanding,  the  greater  part  of  which  in  all 
likelihood  is  uncollectible,  evidences  a  faulty  system  on  which  these  taxes  were  originally 
predicated,  and  forces  upon  us  the  recognition  of  a  condition  which  we  must  not  only 
cope  with,  but  also  find  a  means  to  prevent  a  similar  future  recurrence.  We  have  been 
borrowing  millions  of  dollars  on  the  city's  short-term  notes  (i.  e.,  revenue  bonds)  based 
in  part  on  an  asset  so  unreliable  and  shifty  that  the  greater  our  efforts  to  realize  on  it 
the  faster  it  shrinks  into  nothingness  and  the  less  able  are  we  to  liquidate  the  loans  which 
were  raised  on  these  taxes.  This  disparity  between  real  asset  and  actual  liability  will 
continue  to  grow  unless  a  remedy  can  be  found  that  will  solve  the  problem  somewhat  to 
the  satisfaction  of  the  people  and  without  material  injury  to  the  large  body  of  taxpayers, 
i.  e.,  those  who  pay  taxes  on  real  estate. 

Several  considerations  will  materially  affect  the  remedies  to  be  adopted:  (a)  When  per- 
sonal estates  are  assessed  beyond  a  certain  amount  or  proportion  of  the  actual  value,  it 
results  in  the  removal  of  the  legal  residence  of  the  assessed  and  the  tax  in  consequence 
is  all  lost;  (6)  if,  on  the  other  hand,  the  assessment  on  personal  estates  is  too  low,  the 
effect  necessarily  is  that  a  greater  amount  of  tax  is  imposed  on  the  real  estate  subject  to 
taxation — the  something  that  can  not  run  away  or  be  shifted  must  pay,  and  thus  a  too 
low  assessed  value  on  personal  property  would  result  in  an  inequitable  amount  of  the 
whole  tax  being  imposed  on  real  estate. 

It  would  therefore  seem  good  business  policy  either  to  adopt  a  middle  course,  by  placing 
the  assessment  on  personal  property  at  only  a  proportion  of  the  whole  and  endeavor  to 
perfect  the  system  of  collection  so  as  to  assure  an  absolute  or  nearly  absolute  realization, 
or,  if  the  present  plan  of  assessing  personal  property  at  the  full  value  it  is  assumed  to 
possess  be  adhered  to,  the  aggregate  amount  of  all  assessments  on  personal  property,  as 
confirmed,  should  be  taken  at  say  from  60  per  cent  to  66§  per  cent  of  such,  and  the  amount 
resulting  from  such  percentage  added  to  the  confirmed  assessed  value  of  the  real  estate. 
On  the  combined  assessment  thus  obtained  the  tax  rate  would  be  determined,  extending 
the  tax,  however,  against  every  separate  assessment.  Under  this  method  it  would  follow 
that  to  whatever  extent  the  collections  of  personal  tax  should  exceed  the  proportion  of 
the  total  assessment  of  personal  estate  which  was  taken  to  predicate  the  tax  rate,  the 
general  fund  of  the  city  would  be  benefited  and  following  years'  tax  levies  would  be  cor- 
respondingly reduced.  If  the  actual  collections  of  personal  tax  did  not  exceed  the  pro- 
portion (six-tenths  or  two-thirds)  of  the  whole  assessment  on  personal  property  which  was 
considered  in  determining  the  tax  rate,  we  would  be  no  worse  off  than  we  are  now  in  regard 
to  collections — which  barely  equal  60  per  cent  of  the  whole — but  infinitely  better  off  as 
to  debt,  for  the  reason  that  our  borrowing  by  issue  of  revenue  bonds  would  be  predicated, 


34  UNIFORM    MUNICIPAL   ACCOUNTING. 

as  now,  on  our  total  tax  levy  as  determined  by  the  tax  rate  on  the  confirmed  assessed 
value,  used  for  the  purpose  of  determining  the  tax  rate,  and  we  would  be  able  to  liquidate 
these  loans  on  a  full  collection  of  taxes  on  real  estate  and  a  60  per  cent  collection  of  the 
taxes  on  personal  property;  while,  as  has  already  been  stated,  all  collections  in  excess 
of  60  per  cent  of  the  total  amount  of  personal  taxes  extended  on  the  tax  rolls  would  pass 
into  the  general  fund  of  the  city  as  surplus  tax  collections  and  be  used  to  reduce  following 
years'  levies  in  the  same  manner  as,  for  instance,  the  interest  on  taxes  is  now  used. 

I  submit  these  views  in  regard  to  the  subject  of  personal  taxes  as  it  appeals  to  me,  in  the 
hope  that  it  will  prove  of  sufficient  interest  to  call  forth  discussion  and  comment  and  per- 
haps result  in  something  approaching  a  consensus  of  opinion  as  to  the  remedy,  or  at  any 
rate  best  methods,  whereby  the  condition,  such  as  I  have  referred  to  as  confronting  the 
city  of  New  York,  could  not  in  future  readily  occur. 

The  CHAIRMAN.  The  most  profitable  part  of  the  conference  two 
years  ago  was  a  discussion  of  just  such  points  as  those  made  by 
Comptroller  Metz. 

What  ways  are  there  for  meeting  these  difficulties  that  confront 
city  officials?  You  will  find,  gentlemen,  that  not  all  these  difficul- 
ties are  with  the  Census  Office  itself.  We  have  our  perplexities  and 
we  want  you  to  help  us  by  showing  us  how  we  can  meet  them,  but 
the  conference  will  lose  half  its  value  if  it  does  not — as  was  intended 
two  years  ago — solve  these  questions  as  they  come  up.  Shall  we 
have  any  further  discussion?  It  is  now  after  12  o'clock.  Shall  we 
adjourn  for  the  picture? 

Mr.  BETZ.  Mr.  Chairman,  I  move  we  adjourn  until  2  o'clock. 

The  CHAIRMAN.  Before  we  adjourn  I  will  ask  the  secretary  to  read 
the  list  of  the  delegates  here  present,  with  the  request  that  any  such 
person  whose  name  is  not  on  this  list  will  notify  the  secretary  at  the 
close  of  this  session. 

Doctor  HARTWELL  (after  reading  list  as  given  above).  The  list 
numbers  38  at  present,  representing  something  like  fifteen  different 
states.  If  any  names  have  been  omitted  I  shall  be  glad  to  have  it 
rendered  complete. 

The  CHAIRMAN.  If  there  are  no  questions,  the  motion  to  adjourn 
will  now  be  in  order.  All  those  in  favor  signify  by  saying  "Aye." 
Those  interested  in  having  the  picture  will  adjourn  to  the  north  steps 
of  the  Treasury  building.  The  meeting  is  adjourned. 

SECOND  SESSION,  TUESDAY  AFTERNOON,  FEBRUARY  13. 

The  chairman  called  the  meeting  to  order  at  2.30  p.  m. 

The  CHAIRMAN.  There  is  a  desire  to  have  a  discussion  of  the  papers 
and  subjects  that  were  up  this  morning.  Mr.  DeBerard,  of  the  Mer- 
chants' Association  of  New  York,  wishes  to  speak  on  taxation,  to 
which  the  paper  of  Comptroller  Metz  referred. 

Mr.  DEBERARD.  Mr.  Chairman  and  gentlemen,  I  have  very  little 
to  say  on  the  subject,  but  Comptroller  Metz's  discussion  on  personal 
taxation  seems  to  warrant  a  few  remarks.  He  is  in  a  somewhat 


UNIFORM   MUNICIPAL   ACCOUNTING.  35 

.cult  position  in  having  to  administer  the  finances  of  the  city  on 
the  basis  of  what  he  calls  "dead  horses/'  He  has  a  great  number 
of  millions  of  dollars  that  are  supposed  to  represent  an  asset.  The 
city,  year  by  year,  is  borrowing  money  in  anticipation  of  the  collection 
of  taxes  of  the  succeeding  year,  and  counting  personal  taxes  that 
never  can  be  collected  as  assets.  The  question  that  Mr.  Metz  sug- 
gested is,  how  to  get  rid  of  those  unavailable  assets,  and  how  to  get 
a  system  of  accounting  that  will  bring  the  city's  finances  down  to  a 
true  basis. 

I  have  no  suggestions  to  offer  on  that  line,  but  merely  wish  to  make 
a  very  brief  statement  of  facts.  The  system  of  taxation  of  the  state 
of  New  York  is  in  a  chaotic  condition,  and  has  been  so  for  a  long  time. 
There  are  two  contending  elements  in  the  state  responsible  for  the 
condition.  The  city  of  New  York  has  an  immense  aggregation  of 
property,  and  the  average  country  legislator  desires  to  cultivate  the 
friendliness  of  his  constituents  by  relieving  them  of  taxation  to  as 
large  a  degree  as  possible.  The  tax  laws,  therefore,  are  adjusted  to 
get  as  much  from  the  city  of  New  York  as  is  practicable  and  relieve 
the  country  districts  and  counties  of  as  much  as  possible.  The  con- 
sequence is  that  an  attempt  is  made  to  get  hold  of  as  much  personal 
property  as  possible  for  the  purposes  of  taxation.  The  laws  are 
somewhat  stringent  as  to  personal  property,  and  therefore  it  becomes 
a  most  desirable  end,  for  those  who  have  control  of  that  property, 
to  dodge  taxation.  The  state  of  New  Jersey  has  derived  a  very 
large  income  from  its  lenient  policy  toward  corporations  and  busi- 
ness firms ;  and  the  more  important  cities  of  New  York  have  decided 
that  very  much  income  might  accrue  to  them  if  the  laws  were  more 
liberal,  so  that  the  owners  of  personal  property  would  find  it  expe- 
dient to  keep  it  within  the  jurisdiction  of  the  state.  Another  evil, 
especially  responsible  for  the  condition  which  Mr.  Metz's  paper 
alludes  to,  is  the  manner  in  which  personal  taxes  are  levied  in  the 
state  of  New  York.  It  is  almost  purely  a  matter  of  guesswork.  A 
very  large  number  of  persons  in  the  city  of  New  York  who  have  no 
personal  property  whatever  anywhere  are  annually  assessed  for  con- 
siderable amounts.  Their  names  are  taken  from  the  voting  list. 
They  are  known  to  reside  on  a  certain  street  at  a  certain  number,  and 
notice  is  sent  to  them  that  they  are  assessed  for  a  certain  amount. 
That  amount  is  put  on  the  list  and  they  are  taxed  accordingly;  but 
the  tax  can  never  be  collected,  for  the  simple  reason  that  they  have 
no  property  of  any  kind.  The  subject  is  one  that  has  been  earnestly 
considered  for  many  years  past.  A  bill  is  now  before  the  legislature 
for  permission  to  review  the  whole  subject. 

The  CHAIRMAN.  Does  anyone  desire  to  speak  upon  the  general 
subject  suggested  by  Mr.  Metz,  giving  the  experience  of  his  city  in 
dealing  with  these  perplexing  problems  of  public  revenues? 


36  UNIFORM    MUNICIPAL    ACCOUNTING. 

Mr.  CHASE.  I  would  like  to  ask  Mr.  Tracy  to  give  his  experience 
in  Ohio. 

Mr.  TKACY.  The  legislature  of  Ohio  is  now  battling  with  the  ques- 
tion of  taxation.  The  matter  presents  several  different  phases.  The 
principal  one  is  the  repeal  of  the  tax  inquisitor  law.  In  our  state 
we  have  had  for  many  years  a  provision  that  the  county  commis- 
sioners, the  auditor,  and  the  county  treasurer  may  make  contracts 
to  investigate  the  stock  roll  or  investment  records  of  the  various  cor- " 
porations  that  they  can  get  possession  of,  also  the  mortgage  record 
of  different  counties.  From  these  records  (those  of  Ohio  as  well  as 
those  of  other  states)  they  prosecute  their  investigations  and  endeavor 
to  secure  for  the  taxation  list  the  names  of  all  holders  of  credit. 
This  law  has  proved  very  obnoxious  to  the  people,  and  there  is  not 
much  doubt  but  that  it  will  be  repealed  by  this  legislature.  There 
is  no  doubt  that  this  is  driving  capital  from  the  state.  On  that 
account  principally,  as  well  as  because  only  a  very  small  per  cent  of 
such  property  is  actually  made  to  pay  its  share  of  taxes,  the  people 
seem  to  be  in  favor  of  repealing  the  law.  Another  proposition 
before  the  legislature  is  to  exempt  moneys  and  credits  entirely  from 
taxation — in  other  words,  not  to  attempt  to  lay  a  tax  on  intangible 
property.  It  is  also  being  considered  that  credit  should  be  made  a 
matter  of  record  in  the  county  auditor's  office,  so  as  to  place  it  within 
the  hands  of  the  taxing  officers  before  it  will  be  collectible  in  court; 
but  what  the  legislature  will  do,  beyond  repealing  the  tax  inquis- 
itor law,  is  problematical. 

The  proposition  to  exempt  moneys  and  credits  entirely  from  taxa- 
tion has  taken  quite  a  hold  on  the  financial  organizations  of  the  state. 
It  is  a  fact  that  not  more  than  10  per  cent  of  the  credit  of  our  state 
becomes  subject  to  the  payment  of  taxes,  and  scarcely  5  per  cent  of 
the  money  gets  on  the  tax  list.  Although  we  have  stringent  laws 
and  a  penalty  for  tax  dodging,  their  enforcement  has  been  unsuc- 
cessful, and  I  believe  that  the  Ohio  laws  would  produce  better  results 
if  moneys  were  entirely  exempt  from  taxation. 

There  are  thousands  and  thousands  of  dollars  of  personal  taxes 
remaining  on  our  tax  list  that  are  uncollected.  In  our  department 
we  are  confronted  with  the  question,  how  to  make  the  proper  charge 
for  this  asset,  which  is  a  "dead  horse."  There  is  no  legal  way  at 
present  of  removing  it  from  the  tax  list.  If  the  accounting  auditor 
does  his  duty,  he  continues  to  carry  this  amount  year  after  year,  for 
twenty  years  or  forty  years.  There  is  no  legal  way  of  omitting  it, 
and  in  consequence  you  get  a  large  list,  which  in  the  course  of  time 
becomes  burdensome  for  the  treasurer  to  handle.  It  is  not  collect- 
ible, and  the  proposition  is  before  the  legislature  to  have  the  county 
auditor  and  treasurer  pass  upon  the  personal  tax  annually,  and  to 


UNIFORM    MUNICIPAL   ACCOUNTING.  37 

give  them  the  authority  to  strike  from  the  list  items  that  have 
remained  on  the  list  more  than  five  years. 

Mr.  MAC!NNES.  I  think  Comptroller  Metz's  purpose  in  bringing 
this  matter  before  you  should  be  inferred  from  the  concluding  para- 
graph in  his  paper,  in  which  he  said  he  submitted  his  views  in  regard 
to  personal  taxes  in  the  hope  of  calling  forth  discussion  and  com- 
ments that  may  result  in  something  approaching  a  consensus  of 
opinion.  Comptroller  Metz,  in  speaking  of  this  matter  prior  to  his 
coming  to  the  conference,  emphasized  his  belief  that  in  a  gathering 
such  as  this,  men  coming  from  all  parts  of  the  country,  from  a  great 
many  different  states  and  cities,  where  varying  conditions  were  met, 
would  form  the  very  best  field  and  would  give  him  the  very  best 
audience  in  which  a  paper  of  this  kind  could  be  fully  discussed. 

The  city  of  New  York  is  confronted  with  the  condition  which  a 
great  many  cities  have  to  face,  but  in  this  case  it  is  emphasized 
because  of  the  vastness  of  the  city.  Its  yearly  tax  levy  has  grown 
to  ninety  millions  of  dollars.  Its  annual  budget  is  one  hundred  and 
ten  millions  of  dollars,  and  from  twenty  to  twenty-five  millions  of 
the  necessary  appropriation  is  met  and  provided  from  general  revenue. 
The  city  has  to  raise  from  eighty-five  to  ninety  millions  by  taxes. 
The  experience  of  the  city  since  consolidation  (eight  years  ago)  has 
been  that  of  the  personal  tax  levy  of  102  per  cent  (2  per  cent  to  cover 
deficiency),  barely  60  per  cent  has  been  collected.  The  system  of 
raising  necessary  revenue  consists  in  making  a  budget  to  commence 
in  the  month  of  January  and  in  making  a  tax  levy  to  meet  that 
budget  in  the  following  fall;  so  for  eight  or  nine  months  of  the  year 
we  have  to  meet  our  necessities  by  borrowing,  and  by  borrowing  on 
short-term  notes;  that  is  to  say,  we  presume  that  the  term  will  be 
short.  Still,  some  of  those  notes,  issued  in  the  year  1902,  are  still 
outstanding,  although  the  law  says  they  are  payable  from  that  year's 
tax  levy,  that  is,  from  current  collection.  So  we  have  gone  on 
borrowing  money  on  the  strength  of  this  tax  levy  until  the  present 
comptroller  finds  himself  confronted  with  an  outstanding  ^obligation 
consisting  of  such  short-term  revenue  bonds  amounting  to  forty- 
two  millions  of  dollars.  To  meet  this  we  have  quite  a  little  of  the 
1905  levy,  which  is  all  right,  but  we  have  thirty-five  million  dollars 
of  that  personal-tax  levy  with  which  to  meet  these  short-term  notes. 
Twenty-three  and  one-half  millions  of  that  levy  might  as  well  be 
wiped  off  now,  if  we  had  the  authority.  This  is  what  Mr.  DeBerard 
has  referred  to  as  the  "dead  horse,"  and  there  are  eleven  and  one- 
half  millions  hanging  in  the  traces.  I  do  not  think,  if  they  were  put 
up  at  auction  to-day,  that  the  thirty-five  millions  would  bring  enough 
to  carry  us  back  to  New  York  if  we  were  without  the  means  to  get 
there.  How  to  meet  this  obligation  is  not  the  question  that  the 


38  UNIFORM    MUNICIPAL   ACCOUNTING. 

comptroller  brought  before  this  conference;  the  question  is,  rather, 
how  to  prevent  the  recurrence  of  such  a  condition.  We  shall  have 
to  meet  the  thirty-five  millions  by  raising  that  amount  of  money. 
How  shall  we  prevent  such  a  necessity  ?  That  is  the  question.  If  I 
picture  to  you  in  figures  such  a  condition  as  has  occurred,  perhaps 
it  will  make  clearer  and  plainer  the  nature  of  the  plan  proposed  to 
prevent  its  recurrence.  For  the  year  1905  the  city  of  New  York 
made  a  tax  rate,  predicated  on  five  billions  of  dollars  of  assessed 
valuation  on  real  estate  and  a  little  over  six  hundred  millions  assessed 
on  personal  property.  Now,  those  six  hundred  millions  are  all  that 
remain  from  over  two  billions.  When  the  dragnet  was  cast  to  get 
that  property  that  shifts  whenever  the  assessor  comes  around,  and 
finds  that  the  citizen's  legal  residence  is  not  in  New  York,  but  in 
Newport,  something  like  two  billions  worth  of  property  was  assessed, 
but  before  the  final  confirmation  of  the  assessment,  for  taxable  pur- 
poses, that  amount  dwindled  to  a  little  over  six  hundred  millions. 
In  order  to  raise  eighty-four  million  dollars  of  taxes,  the  tax  levy 
was  predicated  on  these  two  elements:  Five  billions  of  real  estate 
valuation  and  six  hundred  millions  assessed  on  personal  property. 
That  gives  us  a  tax  rate  of  a  little  over  $1.50.  Now,  the  comp- 
troller suggested  in  his  proposition  that  one  way  out  of  the  difficulty 
would  be  to  predicate  the  rate  on  the  five  billions  of  real  estate  and 
on  60  per  cent  of  the  six  hundred  millions  of  personal  property. 
That  would  give  us  $360,000,000  of  personal  property  on  which  to 
base  the  rate,  but  instead  of  giving  us  for  the  100  per  cent  of  the  two 
elements  at  the  rate  of  $1.50  to  raise  $84,000,000  of  taxes,  60  per  cent 
of  the  valuation  of  personal  property  and  100  per  cent  valuation 
on  real  estate  would  yield  a  rate  of  $1.56,  which  would  mean  an 
increase,  in  points,  of  five  or  six  a  year. 

However,  the  tax  can  not  be  stricken  from  the  books  at  the  present 
time,  but  if  we  collect  only  60  per  cent  of  the  total  tax  levied,  we 
shall  be  in  a  position  to  liquidate  all  our  liabilities;  that  is,  in  short- 
term  notes.  Whatever  we  collect  on  personal  property  over  and 
above  60  per  cent  of  its  valuation  would  be  simply  passed  into  the 
principal  of  next  year's  taxes,  in  the  same  way  that  they  use  the 
interest  on  the  taxes  at  the  present  time.  Mr.  Tracy  has  said  that 
the  purpose  of  legislation  in  the  state  of  Ohio  is  to  do  away  with 
all  taxation  on  personal  property,  or  taxes  on  cash  and  credit.  That 
would  mean,  if  it  were  carried  into  effect,  as  regards  the  city  of  New 
York,  an  increase  of  from  fifteen  to  eighteen  points  in  our  tax  levy, 
which  no  administration  would  choose  to  face.  I  do  not  believe  the 
time  has  come  when  we  should  advocate  the  exemption  of  personal 
property. 

Mr.  TKACY.  I  would  like  to  ask  a  question  right  there.  You  take 
your  bank  statement  as  an  account  of  cash,  that  is,  all  money  in 


UNIFOKM    MUNICIPAL   ACCOUNTING.  39 

the  banks  of  New  York,  not  including  the  money  in  circulation. 
There  is  no  exemption  whatever  for  money  debt,  or  anything  else. 
I  would  like  to  know  what  per  cent  you  get  on  your  tax  levy  ? 

Mr.  MAC!NNES.  It  is  very  small;  so  small  as  to  be  almost  infinitesi- 
mal. Nevertheless,  any  other  method  would  mean  at  least  fifteen 
points  increase  in  the  tax  rate — practically  that  on  the  assumed  100 
per  cent  of  valuation  of  real  estate.  The  city  of  New  York  can  not 
afford  to  curtail  its  assessment  of  100  per  cent.  It  is  requisite  that 
each  city  and  town  should  have  forty  or  fifty  million  dollars  to  con- 
tinue its  commercial  development.  If  real  property  were  taxed 
without  any  other  elements,  such  an  increase  in  tax  rate  would 
result  as  would  stop  the  development  which  we  should  have.  It  has 
been  unsatisfactory — so  unsatisfactory  that  the  present  comptroller 
is  confronted  with  the  necessity  of  doing  something  to  pay  off  the 
thirty-five  million  dollars — twenty-three  and  one-half  millions  "dead 
horse,"  and  eleven  and  one-half  millions  "hanging  in  the  traces,"  or 
practically  dead.  He  must  find  some  means  of  raising  that  money; 
and  I  wish  to  say  that  he  is  the  first  comptroller  who  has  had  the 
courage  to  call  attention  to  the  situation.  While  a  solution  remains 
to  be  found  for  the  elimination  of  personal  taxes,  yet  some  solution 
should  be  found.  That  is  the  main  reason,  I  believe,  why  he  brought 
the  matter  before  you.  From  your  experiences  what  should  you  say 
would  be  a  likely  solution  of  this  personal  tax  problem  ?  I  take  it  the 
comptroller's  suggestion  was  merely  a  suggestion.  Is  there  any  real 
objection  to  it?  Mr.  Chairman,  in  the  absence  of  the  comptroller,  I 
merely  wish  to  place  before  the  gathering  some  figures  that  illustrate 
the  method  brought  to  your  notice. 

The  personal  property  originally  assessed  gave  us  upward  of  two 
billion  dollars,  but  it  was  found  that  the  legal  residence  of  so  many 
of  those  who  were  assessed  was  not  in  New  York,  but  in  Newport, 
Palm  Beach,  and  other  places  that  finally  those  two  billion  dollars 
dwindled  to  six  hundred  million  dollars. 

Mr.  CHASE.  Is  that  personal  tax  collected  on  credits,  moneys,  and 
other  securities  ?  I  simply  ask  for  information. 

Mr.  MAC!NNES.  It  is  based  largely  on  securities. 

Doctor  CLEVELAND.  That  is  the  question  I  would  like  to  ask. 
Does  this  six  hundred  million  dollars  include  not  only  moneys  and 
credits,  but  merchandise  and  other  personal  effects? 

Mr.  MAC!NNES.  The  personal  property  of  the  city  of  New  York  is 
based  largely  on  securities,  that  is,  securities  which  people  do  not 
come  in  and  swear  off  as  exempt  from  taxation,  under  the  laws  of 
the  state  of  New  York. 

Mr.  KIVES.  I  have  been  in  the  comptroller's  office  of  Shreveport, 
La.,  for  six  years.  There  is  only  one  man  in  our  city  who  has  money 
on'our  roll.  Herdid  notVhave  any  property  and  he  put  himself  on 


40  UNIFORM    MUNICIPAL    ACCOUNTING. 

the  roll  for  five  hundred  dollars  in  money.     He  is  the  only  man  in 
our  town  assessed  for  money. 

Twenty  years  ago  I  borrowed  some  money  from  a  friend  to  buy  a 
lot  to  build  a  home.  There  was  a  law  to  assess  mortgages;  the 
assessor  came  along  and  assessed  the  holder  of  this  mortgage  note. 
He  came  to  me  and  told  me  to  take  this  note  and  mark  it  paid  so 
that  he  could  say  the  bill  was  paid.  It  is  simply  a  dead  letter.  Take 
the  assessors'  roll,  and  our  personal  tax  is  nothing  in  the  world  but 
merchandise  and  live  stock — horses,  cows,  etc. — that  is,  personal 
property.  There  is  nothing  else  on  our  rolls.  That  five  hundred 
dollars  is  the  only  money.  Now,  bank  stock,  of  course,  is  assessed. 
Beyond  that,  the  five  hundred  dollars  is  the  only  money  on  our  rolls. 

Mr.  HENDERSON.  I  would  like  to  ask  a  question.  Did  Mr. 
Maclnnes  state  whether  he  classes  all  property  outside  of  intangible 
property  as  real  estate  ? 

Mr.  MAC!NNES.  Real  estate  as  considered  by  the  assessors  of  the 
the  city  of  New  York  consists,  first,  of  sites  and  buildings;  next, 
property  of  corporations  assessed  under  the  special  franchise  law  of 
1899 — all  tangible  property  that  is  assessed  by  the  city  assessors. 
These  are  the  elements  of  the  real  estate  taxes  of  the  city  of  New 
York. 

Mr.  HENDERSON.  I  admire  a  man  who  has  the  courage  to  state 
his  convictions.  Mr.  Metz,  having  the  courage  of  his  convictions, 
will  have  no  hesitancy  in  saying  to  the  public  that  the  present 
system  will  bring  it  into  more  and  more  difficulty  every  year. 

Mr.  METZ.  It  is  exactly  what  I  aim  to  do. 

Mr.  SHEPARD.  Mr.  Chairman,  we  have  our  troubles  in  Buffalo. 
We  have  three  sources  of  revenue  for  taxation.  Real  estate,  which 
bears  approximately  93  per  cent  of  the  taxes;  franchise  taxes,  which 
bear  approximately  4  per  cent;  and  personal  taxes,  which  bear  3 
per  cent  or,  to  be  exact,  2.6  per  cent.  Now,  it  seems  to  me,  there 
are  two  propositions  to  consider:  One  is  how  much  are  we  to  collect 
from  taxation  on  personal  property.  That  is  a  pretty  broad  propo- 
sition, and  of  course  we  can  only  make  suggestions  as  to  how  to  do 
it.  It  is  largely  a  matter  of  legislation,  which  we  can  not  control. 
The  other  is  what  to  do  (and  is  a  matter  of  bookkeeping)  with  the 
personal  property  tax  that  is  uncollectible.  The  gentleman  from 
New  York  has  stated,  as  I  recollect  the  figures,  that  they  have  about 
six  hundred  million  dollars  of  taxes  after  they  get  through  with  the 
dragnet,  and  they  collect  about  60  per  cent  of  that,  so  that  New" 
York  is  really  getting,  if  they  get  that,  8  per  cent  of  their  budget 
from  personal  property.  In  Buffalo  we  get  only  2.6  per  cent.  It  is 
a  great  source  of  complaint  with  us  that  real  estate  bears  so  large  a 
burden. 


UNIFORM    MUNICIPAL   ACCOUNTING.  41 

It  is  well  known  that  the  loss  from  bad  debts  of  the  average 
wholesale  business  house  varies  from  1.5  per  cent  to  2.5  per  cent — 
say  an  average  of  2  per  cent — of  the  total  amount  of  business  done 
annually.  Therefore,  if  the  total  loss  by  bad  debts  on  the  part  of 
cities  does  not  exceed  2  per  cent  of  the  budget,  the  loss  is  not  greater 
than  that  of  the  average  business. 

It  is  indeed  a  serious  proposition  how  to  collect  a  bad  tax,  and 
one  that  must  be  necessarily  controlled  by  legislation.  Judging 
from  remarks  made  here,  some  states  have  much  better  laws  than 
others  in  this  particular,  and  especially  as  regards  the  collection  of 
delinquent  personal  property  assessments.  If  consistent  with  the 
laws  of  the  respective  communities,  would  it  not  be  desirable  to 
include  each  year  in  the  tax  budget,  just  as  they  do  in  New  York 
city,  2  per  cent,  or,  better  still,  2.5  or  3  per  cent  as  an  allowance  for 
taxes  that  are  never  collected;  just  as  business  houses  in  anticipation 
of  expense  accounts  make  an  allowance  for  bad  debts  ? 

Mr.  MAC!NNES.  The  city  of  New  York  allows  2  per  cent. 

Mr.  SHEPARD.  I  would  like  to  ask  Mr.  Maclnnes  who  collects  the 
tax. 

Mr.  MAC!NNES.  An  official  whose  title  is  that  of  "tax  receiver." 

Mr.  SHEPARD.  Why  does  he  not  collect? 

Mr.  MAC!NNES.  Because  he  is  a  " receiver.'7 

Mr.  SHEPARD.  That  would  be  a  proper  reason,  but  is  it  the  reason 
in  this  case? 

Mr.  MAC!NNES.  We  have  the  right  of  showing  that  the  taxes  have 
not  been  collected  and  that  it  is  necessary  to  proceed  without  waiting 
for  voluntary  payments.  After  the  expiration  of  a  certain  time  we 
have  the  right  of  placing  the  tax  levy  in  the  hands  of  a  receiver  of 
taxes  for  collection,  and  unless  a  good  excuse  is  given  for  delay  in  the 
payment  of  taxes,  summary  measures  are  resorted  to  very  quickly. 
It  will  be  our  experience  this  year  that  for  the  current  levy  the  amount 
uncollected  on  the  1st  day  of  July  next — that  is,  June  30,  which  is 
the  end  of  our  fiscal  year — will  average  about  five-eighths  of  1  per  cent. 

Mr.  BECK.  May  I  ask  the  question  why  they  had  to  collect  a 
"dead"  debt,  or,  rather,  why  the  collecting  was  not  done  before? 

Mr.  MAC!NNES.  The  question  asked  by  Mr.  Beck  in  regard  to  the 
collection  of  taxes  is  very  pertinent  to  the  question  under  discussion, 
and  at  this  time  I  think  it  would  be  opportune  to  have  the  method 
of  procedure  for  collection  of  taxes  by  the  city  of  New  York  explained 
by  one  who  is  thoroughly  familiar  with  the  subject.  I  refer  to  Mr. 
Rathyen,  accountant  in  the  comptroller's  office  of  the  city  of  New 
York.  He  is  here  and  I  now  call  upon  him  for  the  sake  of  securing  a 
thorough  explanation  of  the  method  of  procedure  in  the  collection  of 
taxes.  Mr.  Rathyen  has  prepared  a  paper  on  the  subject,  which  he 
will  now  present  to  the  conference. 


42  UNIFORM    MUNICIPAL   ACCOUNTING. 

(Mr.  Rathyen's  paper  follows.) 

THE   ACCOUNTING   PROCEDURE    OF   THE   CITY   OF   NEW   YORK   IN  RELATION  TO  THE  LEVY  AND 
COLLECTION    OF   TAXES   AND    ASSESSMENTS. 

When  the  amount  of  taxes  to  be  raised  in  each  year  is  finally  determined  and  confirmed 
by  the  board  of  aldermen,  the  tax  rolls  showing  the  assessed  valuation  on  each  piece  and 
parcel  of  land  in  the  city  of  New  York,  together  with  the  amount  taxed  against  each  piece 
and  parcel,  are  transmitted,  usually  in  August,  to  the  receiver  of  taxes  for  collection.  The 
taxes  so  levied  are  due  and  payable  on  the  first  Monday  in  October  of  each  year. 

The  total  amount  levied  in  each  year  to  meet  the  expenses  of  the  government  is  usually 
between  eighty  million  and  ninety  million  dollars,  this  being  the  total  amount  of  the  budget 
appropriation  less  the  sum  of  the  general  fund  applicable  thereto,  together  with  2  per  cent 
on  the  resultant  tax  levy,  to  meet  any  deficiency  in  the  collection  of  taxes,  the  said  defi- 
ciency being  caused  by  erroneous  valuations,  discount  allowed  for  prompt  payment  within 
the  month  of  October,  and  cancellations  pursuant  to  orders  of  courts.  The  amount  of  the 
tax  levy  is  charged  to  the  receiver  of  taxes  on  the  books  of  the  chief  accountant  of  the 
department  of  finance,  and  an  account  known  as  "  tax  levy  of  —  —"is  credited.  The  said 
account  "  tax  levy  of  —  -"  is  then  charged  and  a  general  appropriation  account  for  the 
specific  year  is  credited. 

The  general  appropriation  account  is  then  charged,  and  individual  accounts  are  credited 
with  the  amount  allotted  by  the  board  of  estimate  and  apportionment. 

The  final  result  is  that  the  receiver  of  taxes  is  charged  with  the  total  amount  of  taxes  to 
be  raised  and  the  individual  appropriation  accounts  credited,  together  with  a  deficiency 
account,  using  the  intermediary  accounts,  viz,  tax  levy  of  —  —  and  general  appropria- 
tion, as  the  accounts  to  show  at  the  first  glance  the  total  amount  levied  and  the  total  amount 
appropriated  for  general  expenses. 

A  general  ledger  is  kept  in  the  main  office  of  the  receiver  of  taxes,  which  shows  in  summary 
accounts  the  business  done  and  remaining  to  be  done  in  all  of  the  boroughs. 

The  detailed  transactions  affecting  each  borough  are  recorded  in  a  local  borough  ledger 
kept  in  the  office  of  the  deputy  receiver  in  each  borough. 

By  means  of  accounts  current,  a  form  of  which  is  presented  herewith,  a  monthly  return 
is  made  to  the  receiver  of  taxes  of  the  volume  of  business  done  in  each  borough,  showing  the 
condition  of  the  unliquidated  portion  of  the  business  at  the  date  of  report.  The  accounts 
current  from  the  several  boroughs  can  be  readily  checked  from  the  ledger  of  the  receiver 
of  taxes,  and  he  thereupon  makes  a  general  account  current,  reporting  to  the  comptroller 
the  transactions  of  his  bureau  as  a  whole.  The  chief  accountant  of  the  department  of 
finance,  by  means  of  the  procedure  of  checking  the  transactions  affecting  the  receiver  of 
taxes,  is  enabled  to  balance  the  account  of  the  receiver  of  taxes  on  his  books,  the  debit  bal- 
ance of  which  at  the  close  of  the  month  being  in  absolute  agreement  with  the  balance  unliqui- 
dated hi  the  hands  of  the  receiver  of  taxes. 

The  advantage  of  keeping  a  general  set  of  books  in  the  main  office  of  the  receiver  of 
taxes  is  that  he  has  full  oversight  at  all  times  of  what  is  going  on  in  the  accounts  of  the 
borough  offices.  It  is  impossible  for  accounts  of  borough  offices  to  get  into  arrears  without 
his  knowledge,  and  through  his  chief  bookkeeper  he  has  at  all  times  every  opportunity  for 
an  efficient  audit  of  all  the  accounts  concerning  the  business  committed  to  his  charge. 

The  collector  of  assessments  and  arrears  is  charged  with  the  amount  of  arrears  of  taxes 
(when  they  become  arrears,  viz,  June  1  of  the  year  following  the  date  of  the  levy),  the 
same  being  transmitted  to  him  by  the  receiver  of  taxes.  He  is  also  charged  with  all  assess- 
ments as  levied  from  time  to  time. 

While  the  method  of  accounting  in  the  office  of  the  collector  of  assessments  and  arrears 
is  precisely  the  same  as  that  in  the  office  of  the  receiver  of  taxes,  the  number  of  accounts 
kept  in  the  arrears  offices  is  very  large,  aggregating  some  15,000  accounts,  distributed  in  the 
five  boroughs. 


UNIFORM    MUNICIPAL   ACCOUNTING.  43 

All  the  individual  assessments  accounts  support  a  trunk  fund  of  some  nature,  the  fund 
itself  being  authorized  by  an  act  of  legislature. 

The  acts  provide  that  the  funds  shall  be  kept  separate,  so  as  to  make  a  proper  application 
of  moneys  collected  to  the  specific  bond  issue. 

The  assessment  fund  accounts  are  also  kept  by  the  chief  accountant  of  the  department  of 
finance,  while  the  collector  not  only  keeps  a  record  of  the  funds,  but  also  the  auxiliary 
accounts  thereto  representing  each  improvement  assumed  under  specific  legislative  enact- 
ments, so  that  in  all  the  transactions  affecting  any  auxiliary  account  a  corresponding  entry 
is  made  in  the  trunk  fund,  to  the  end  that  the  balance  shown  on  the  trunk  fund  is  in  absolute 
agreement  with  the  total  of  all  the  auxiliary  accounts. 

In  addition  to  the  regular  tax  and  assessment  accounts  kept  in  the  offices  of  the  receiver 
of  taxes  and  the  collector  of  assessments  and  arrears,  over  and  double  payment  accounts 
are  kept.  These  accounts  represent  over  and  double  payments  made  in  error  on  each  year's 
tax  levy  or  assessment  fund  accounts. 

As  soon  as  they  are  revealed  by  the  clerks  posting  payments  to  the  tax  or  assessment  rolls 
an  entry  is  made  in  an  over  and  double  record,  and  at  the  end  of  each  quarter  recapitulated 
and  journalized,  charging  the  tax  or  assessment  account,  thereby  showing  the  actual 
condition  of  the  tax  or  assessment  account. 

When  possible,  parties  paying  their  taxes  or  assessments  twice  or  in  error  are  notified, 
and  when  they  appear  to  make  application  for  refunds,  the  proper  affidavits  and  all  other 
necessary  documents  are  prepared.  The  refunds,  when  certified  by  the  receiver  of  taxes  or 
the  collector  of  assessments  and  arrears,  are  recorded  in  a  record  of  refunds,  and  at  the  end 
of  each  quarter  are  journalized,  charging  the  over  and  double  payment  account  affected 
and  crediting  refunding  taxes  or  assessments  paid  in  error.  This  latter  account  is  then 
closed  out  into  the  account  entitled  "receiver  of  taxes  or  collector  of  assessments  and  arrears." 

The  CHAIRMAN.  We  have  given  quite  a  good  deal  of  time  to  this 
subject,  and  while  we  do  not  want  to  shut  off  the  discussion  upon  any 
subject,  I  know  that  the  question  has  been  raised  by  one  of  the 
gentlemen  here  whether  we  should  give  much  longer  time  to  this,  or 
whether  we  shall  proceed  to  the  discussion  of  Bulletin  20  and  com- 
parable statistics.  However,  before  we  take  up  that  subject,  I  wish 
to  call  attention  to  the  work  to  be  taken  up  to-morrow — No.  8  on  the 
programme  for  to-morrow  afternoon :  ' '  Consideration  of  the  Glossary 
of  Terms  proposed  by  the  Committee  of  the  National  Municipal 
League:  Dr.  Frederick  A.  Cleveland,  New  York  city,  chairman  of 
the  committee." 

A  great  many  people  have  been  working  upon  this  subject  for  a  good 
many  years.  One  of  the  things  to  be  considered  in  seeking  a  basis  for 
future  progress  must  be  a  common  agreement  of  terms.  If  when  one 
of  us  uses  a  word  he  means  one  thing  and  the  person  who  hears  it 
understands  him  to  mean  another,  we  can  never  get  to  any  agreement ; 
there  can  be  no  uniformity.  As  the  basis  of  uniformity  there  must  be 
a  common  usage  as  to  terms  as  well  as  classification.  Part  of  the 
work  of  Bulletin  20  has  consisted  in  working  out  a  glossary  of  certain 
terms  so  far  as  necessary  for  that  work,  but  there  are  many  branches 
of  municipal  accounts  and  affairs,  particularly  the  accounts,  in  which 
the  need  of  a  common  agreement  is  imperative. 

The  Municipal  League  appointed  a  committee,  of  which  Doctor 
Cleveland  is  chairman,  and  a  number  of  gentlemen  here  present  are 


44  UNIFORM    MUNICIPAL   ACCOUNTING. 

also  members,  to  work  upon  this  plan.  The  query  comes  here  whether 
it  is  worth  while  for  this  committee  to  make  its  presentation  of  this 
glossary  of  terms  to-morrow,  or  whether  it  would  be  better  for  the 
gentlemen  here  assembled  to  cooperate  with  other  bodies,  not  only  the 
committee  of  the  National  Municipal  League  but  with  other  bodies  as 
well,  in  having  a  committee  to  consider  this  matter.  It  has  been  sug- 
gested that  a  committee  be  appointed  by  this  body  to  go  over  the 
work  of  Doctor  Cleveland  between  now  and  to-morrow  afternoon  and 
be  ready  to  make  suggestions  with  reference  thereto  by  that  time,  and 
thus,  as  it  were,  expedite  and  put  into  a  business  form  a  consideration 
of  those  things  which  must  be,  in  some  respects,  very  important. 
Shall  a  committee  be  appointed  to  thus  take  up  the  question  with 
Doctor  Cleveland  between  now  and  to-morrow,  and  so  bring  up  the 
whole  matter  for  discussion  when  he  presents  his  paper? 

Mr.  BECK.  I  move  that  such  a  committee  be  appointed. 

The  CHAIRMAN.  You  have  heard  the  motion.  All  those  in  favor  of 
this  motion  will  signify  by  saying  aAye;?;  contrary,  "No."  The 
motion  prevails. 

I  will  name  the  following  gentlemen  to  serve  as  the  committee: 
Messrs.  Howard  C.  Beck,  of  Detroit,  Mich.;  Duncan  Maclnnes,  of 
New  York;  J.  O.  Lea,  of  Charleston,  S.  C. ;  Charles  F.  Wilson,  of  Den- 
ver, Colo.;  and  Harry  T.  Upham,  of  Cambridge,  Mass. 

I  desire  that  the  Census  Bureau  shall  be  represented,  and  I  will  add 
to  that  committee  Mr.  Maling.  These  gentlemen  named  will  meet 
with  Doctor  Cleveland  to  consider  this  matter. 

I  was  requested  this  morning  to  appoint  a  committee  on  resolutions 
and  procedure.  I  will  appoint  the  following  named  gentlemen  to 
constitute  such  a  committee:  Messrs.  Harvey  S.  Chase,  of  Boston, 
Mass.;  Walter  J.  Shepard,  of  Buffalo,  N.  Y.;  Louis  Betz,  of  St.  Paul, 
Minn.;  Joseph  T.  Tracy,  of  Columbus,  Ohio;  W.  McV.  Evans,  of 
Kichmond,  Va.;  Willett  B.  Gano,  of  Orange,  N.  J.;  Henry  E.  Turner, 
of  Boston,  Mass. ;  Harry  B.  Henderson,  of  Cheyenne,  Wyo. ;  Walter  M. 
Tyson,  of  Reading,  Pa. ;  and  H.  L.  Austin,  of  Albany,  N.  Y. 

Now,  to  return  to  the  general  subject  of  comparability  of  statistics. 
What  is  needed  to  make  Census  Bulletin  20  more  valuable  to  the  peo- 
ple of  the  cities  ?  This  leads  to  the  question  which  we  desire  to  have 
discussed,  as  I  stated  this  morning,  How  far  are  these  other  statistics 
of  cities  not  those  of  finances  wanted  year  after  year  ? 

Mr.  WATSON.  Mr.  Chairman  and  members  of  the  conference,  I  do 
not  want  to  interfere  with  the  order  of  business,  but  I  would  like  to 
speak  on  the  question  of  the  collection  of  personal  taxes,  in  view  of  the 
fact  that  in  most  of  the  states  general  laws  are  passed  by  the  legisla- 
ture governing  the  assessment  and  collection  of  taxes,  and  different 
states  have  different  laws.  In  my  state,  New  Jersey,  real  property  is 
assessed  by  the  local  assessors,  so  is  all  other  property.  I  would  like 


UNIFORM    MUNICIPAL   ACCOUNTING.  45 

to  know  how  you  can  get  one  class  of  personal  property,  such  as  per- 
sonal property  in  a  mill.  How  do  they  propose  dividing  that  personal 
property  and  leaving  out  one  class  of  property?  Now,  what  I  would 
like  to  know  is  how  we  can  drop  a  person  from  the  tax  list  and  still 
have  a  tax  left  not  subject  to  review  by  the  courts.  I  would  like  to 
get  at  a  remedy  for  this. 

Doctor  CLEVELAND.  The  gentleman  has  raised  a  very  interesting 
question  here,  and  a  very  vital  one,  but  considering  the  fact  that  the 
question  is  one  which  has  been  discussed  for  the  last  two  hundred 
years,  I  am  wondering  whether  or  not  it  would  be  possible  for  us  at  a 
meeting  such  as  this  even  to  suggest  a  remedy.  It  seems  to  have 
resolved  itself  into  questions  of  this  kind:  (1)  Shall  we  have  a  direct 
personal  property  tax  ?  I  am  of  the  opinion  that  concealment  of  per- 
sonal property  makes  necessary  official  inquisition  if  we  are  to  get  at  the 
truth.  This  is  very  repulsive  to  the  American  mind;  such  a  method  of 
detection  would  not  be  possible  under  a  government  less  aristocratic 
or  less  autocratic  than  that  of  Russia  or  Germany.  (2)  A  second 
method  proposed  for  the  collection  of  a  personal  property  tax  is  found 
in  a  tax  on  capitalization,  thereby  affording  a  means  of  reaching  the 
individual  stockholder  through  the  corporation — that  is,  a  charge  on 
the  basis  of  capital  liabilities  held  by  investors.  In  this  we  meet  with 
all  kinds  of  difficulties — questions  of  surplus  and  deficit,  and  all  that 
sort  of  thing.  We  have  problems  of  taxation  just  as  difficult  as  in  the 
direct  personal  tax,  although  we  can  make  provisions  for  reaching  a 
corporation  so  long  as  it  remains  within  legal  jurisdiction.  But,  then, 
the  corporation  may  move  out  of  the  city  and  out  of  the  state  and  go 
to  some  other  state,  and  we  have  another  case  of  concealment.  (3)  A 
third  proposition  which  comes  to  us  as  a  solution,  and  which  has  been 
very  often  attempted  in  this  country  with  more  or  less  success,  is  the 
income  tax.  With  the  income  tax,  however,  there  are  quite  as  great 
difficulties  in  arriving  at  the  amount  of  one's  income  as  there  are  in 
determining  the  amount  of  property  owned.  There  seem  to  be  only 
two  ways  left  to  get  at  an  equitable  solution  of  the  personal  property 
tax  problem — either  to  abandon  it  or  to  enforce  it  through  the  Federal 
Government.  In  this  country  we  might  have  a  central  levying  and 
collecting  body,  through  which  personal  taxes  might  be  collected  and 
apportioned,  in  order  that  persons  may  not  evade  taxation  by  getting 
out  of  the  jurisdiction.  The  remedy,  however,  would  at  present  seem 
impracticable.  The  question  proposed  by  Comptroller  Metz  comes 
to  one  of  two  propositions — either  to  accept  the  difficulties  of  the 
direct  personal  property  tax  and  get  the  best  we  can  out  of  it  under 
all  of  the  adverse  conditions  represented — that  is,  to  accept  a  return  all 
the  way  from  15  per  cent  to  90  per  cent — or  to  abandon  the  personal 
property  tax  altogether.  If  we  do  abandon  the  personal  tax  and 
throw  the  whole  burden  of  taxation  on  real  estate,  we  have  a  form  of 


46  UNIFORM    MUNICIPAL,   ACCOUNTING. 

property  which  may  be  located  and  levied ^on.  To  do  this,  however, 
would  require  a  complete  readjustment  of  all  the  machinery  of  taxa- 
tion. This  is  the  situation.  Can  we  decide  the  question  of  how  to 
handle  it  here,  when  two  hundred  years  of  political  and  academic 
controversy  have  failed  ?  It  has  been  under  discussion  for  the  last 
two  centuries ;  and  while  Comptroller  Metz  has  to  meet  one  situation, 
Buffalo  has  another,  and  Detroit  another,  but  the  problem  is  prac- 
tically the  same  for  all  of  them. 

Mr.  DEBERARD.  Mr.  Metz' s  complaint  is  that  after  assessing  the  per- 
sonal property  in  the  city  of  New  York,  the  owners  slide  out — go  some- 
where else  until  the  assessment  simmers  down  to  $600,000,000.  Now, 
movable  property  will  take  itself  to  the  town  where  it  is  taxed  least. 
That  is  a  fundamental  thing  in  taxation.  The  city  of  New  York  has 
immense  amounts  of  taxable  property  which  seek  other  places  when 
assessments  are  made.  Comptroller  Metz's  problem  is  to  keep  that 
property  where  it  can  be  taxed.  The  way  to  do  it  is  to  make  a  lower 
tax  rate  upon  personal  property  in  the  city  of  New  York  than  is  made 
in  the  surrounding  states ;  make  it  less  than  the  tax  rate  upon  realty, 
with  the  probable  result  that  the  immense  volume  of  personal  property 
which  now  seeks  to  evade  the  tax  would  come  forward  and  submit  to 
taxation. 

The  CHAIRMAN.  Is  there  any  further  discussion  of  this?  If  so,  I 
would  be  pleased  to  have  some  one  lead  the  discussion. 

Mr.  SHEPARD.  In  some  cities  it  is  customary  for  the  moneys  used 
for  the  payment  of  interest  on  the  public  debt  to  be  included  in  the 
sinking  fund.  In  other  words,  the  moneys  used  for  the  redemption  of 
debt  and  for  the  payment  of  interest  on  debt  are  included  in  one 
account  on  the  books,  and  this  is  called  a  single  interest  fund.  Of 
course,  in  computing  the  net  debt  of  a  municipality,  it  is  proper  that 
the  amount  in  the  sinking  fund  should  be  deducted  from  the  total 
bonds  outstanding,  in  order  to  determine  the  net  debt. 

The  CHAIRMAN.  The  general  rule  governing  that  may  be  logical  or 
illogical.  If  the  money  is  known  as  an  interest  fund  and  is  carried 
on  the  city  books  as  such,  it  is  treated  as  a  sinking  fund.  If,  on  the 
other  hand,  the  city  is  carrying  this  money  with  the  city  cash  bal- 
ances, it  appears  with  the  city  cash  balances — we  have  not  separated 
it,  but  left  it  there.  If  anyone  wishes  to  consider  that  as  apart,  in 
its  relation  to  the  debt,  as  the  amount  of  that  cash  is  given  in  the 
table,  he  can  deduct  that  as  well  as  the  other.  It  has  been  difficult 
for  the  Office  to  make  a  working  rule  as  to  the  separation  of  what 
was  cash  for  the  meeting  of  current  obligations  and  cash  which  was 
held,  and  held  only,  for  debt  purposes.  Let  me  state  a  general 
proposition  governing  our  selection  or  separation  of  cash  in  so-called 
interest  funds  from  that  which  we  call  sinking  fund  proper.  If  the 
cash  in  the  sinking  fund  appears  to  be  cash  that  can  be  touched  at 


UNIFORM    MUNICIPAL   ACCOUNTING.  47 

any  time  for  any  purpose,  then  the  instructions  to  the  clerks  have 
been  to  treat  it  not  as  a  sinking  fund  but  as  a  purely  administrative 
cash  fund;  but  if  the  cash  is  set  aside  in  any  other  form,  and  can  not 
be  diverted  and  can  not  be  used  for  current  expenses,  it  is  a  sinking 
fund.  We  should  find  a  better  separation  if  there  is  a  better  one. 

Mr.  BECK.  Would  it  not  be  possible  to  deduct  the  money  in  the 
sinking  fund  from  the  amount  in  the  interest  fund  ?  Would  that  not 
give  you  the  amount  of  net  cash  in  the  fund  available  for  debt  at  the 
close  of  the  fiscal  year? 

The  CHAIRMAN.  The  claims  outstanding  of  any  kind,  whether  inter- 
est or  anything  else,  we  have  not  considered,  not  because  they  ought 
not  to  be,  for  they  ought  to  be,  but  because  we  find  among  the  175 
cities  at  least  169  different  ways  of  reporting  unpaid  claims  of  vari- 
ous kinds.  Now,  while  the  unpaid  claims  should  come  into  final  and 
perfect  statistics,  it  is  folly  for  us  to  attempt  to  take  up  unpaid  claims 
at  the  present  time  until  we  can  secure  data  upon  something  like  a 
comparable  basis.  Everyone  knows  there  must  be  unpaid  claims 
which  should  be  recognized;  but,  on  the  other  hand,  there  are  unac- 
counted for  assets  not  taken  into  account,  and  they  are  found  in  the 
cities  that  have  large  amounts  of  unpaid  claims  of  various  classes. 
They  are  usually — not  universally — the  uncollected  and  uncata- 
logued  assets. 

Mr.  CHASE.  I  would  like  to  ask  Mr.  Powers  what  percentage,  in 
his  experience,  is  represented  by  unpaid  claims. 

The  CHAIRMAN.  I  should  not  want  to  express  an  opinion,  because 
there  are  so  many  different  claims.  For  example,  some  cities  pay 
salaries  on  the  first  of  the  month,  and  then  there  is  one  month's  sal- 
ary always  as  an  unpaid  claim.  Our  exhibit,  based  upon  that  pay- 
ment, will  be  lapping  over  one  month  each  year.  Other  cities  have 
but  two  weeks  of  salary.  Now,  one  city  has  one  class  of  unpaid 
claims  and  others  have  another.  We  have  found,  however,  a  rea- 
sonable rule  for  reporting  these  unpaid  claims  in  a  way  that  will  not 
do  any  harm.  If  we  put  a  city  that  shows  up  these  unpaid  claims 
in  a  proper  way  beside  the  city  that  does  not  have  anything,  we  make 
an  unjust  comparison  of  the  city  that  has  a  proper  account  with  the 
city  with  no  account  at  all. 

Mr.  CHASE.  What  is  the  per  cent;  about  2  or  2.5? 

The  CHAIRMAN.  I  think  that  varies;  but  it  is  about  2.5  to  5  per 
cent. 

Mr.  CHASE.  Is  there  an  offset  to  that? 

The  CHAIRMAN.  Yes,  sir;  and  there  are  varying  amounts  of  uncol- 
lected taxes.  We  have  not  tried  to  get  an  exhibit  of  the  amount  of 
uncollected  taxes,  or  the  amount  of  uncollected  taxes  which  might  be 
collected. 

27311— 06-— 4 


48  UNIFORM   MUNICIPAL   ACCOUNTING. 

Mr.  KIVES.  Is  it  not  a  fact  that  various  cities  of  the  state  bring 
into  their  statements  of  assets,  balances  that  should  not  be  put  in? 
Is  that  not  a  fact? 

The  CHAIRMAN.  We  are  going  to  have  " balances"  to-morrow,  and 
we  will  discuss  them  then. 

Mr.  HENDERSON.  Mr.  Chairman,  I  will  ask  a  question.  I  would 
like  to  know  how  you  treat  this  item  in  your  Bulletin  20,  which  I 
have  not  had  time  to  examine  thoroughly.  Interest  is  paid  on 
account  of  bonds  for  the  current  year.  Is  the  administration  then 
in  power  chargeable  with  that  interest  as  an  expense  of  maintenance  ? 
Do  you  charge  that  item  in  the  maintenance  column  of  the  munici- 
pality, or  does  the  charge  appear  against  the  interest  fund  instead  of 
being  included  in  the  expense  item  ? 

The  CHAIRMAN.  Interest  is  charged,  or  tabulated  in  our  report, 
wholly  as  interest,  with  one  exception.  In  1903,  in  the  city  of  New 
York,  in  the  construction  of  the  subway,  that  city,  in  keeping  the 
account  with  the  subway,  has  properly  (according  to  the  rules  of 
accounting)  charged  up  the  interest  of  its  subway  loans  during  the 
construction  of  the  subway  to  outlay.  That  is  according  to  well- 
known  rules  of  accounting.  I  expected  Professor  Elliott,  of  Colum- 
bia University  of  New  York,  and  also  a  professor  of  the  University 
of  Wisconsin  would  be  here  to  call  attention  to  this  subject  of  interest 
in  the  matter  of  school  statistics.  Shall  we,  in  the  matter  of  school 
statistics,  charge  up  the  interest  on  school  bonds?  Shall  we  charge 
up  interest  in  each  one  of  these  items?  If  you  will  recall  my  paper 
of  this  morning,  you  will  remember  that  I  said  that  one  of  the  things 
which  must  be  discussed  before  we  reach  truly  comparable  statistics 
is,  " Shall  interest  be  charged  in  a  lump  sum  as  interest;  or  shall  we 
keep  an  account  of  this  interest  for  the  separate  items,  such  as  main- 
tenance of  parks,  maintenance  of  schools,  streets,  and  the  like?" 
We  present  this  question,  and  we  would  like  the  accountants  here 
present  to  answer  the  further  question :  How  far  should  this  interest 
be  charged  to  make  comparable  statistics  of  these  separate  items? 

Let  me  state  the  problem  for  schools  as  it  presents  itself  to  me. 
How  are  we  to  secure  these  comparable  statistics?  We  find  that 
some  cities  seldom  borrow  for  schools,  but  raise  money  for  streets, 
sewers,  and  the  like  by  issuing  bonds.  A  large  part  of  the  school- 
houses  are  paid  for  out  'of  current  revenue.  In  other  cities,  where 
there  is  another  set  of  political  questions — not  school  questions  but 
economic  questions— it  is  necessary  to  have  a  good  reason  for  con- 
tracting debt,  and  a  school  is  something  for  which  people  are  ready 
to  run  in  debt.  The  result  is  they  use  all  the  current  revenue  to 
make  appropriations  for  all  permanent  improvements  except  schools. 
So  you  will  find  in  one  city  almost  all  of  the  debt  charged  to  schools, 
and  in  another  city  that  has  just  as  many  schools  there  is  scarcely  a 


or  THE 
UNIVERSITY 

UNIFORM    MUNICIPAL   ACCOUNTINGS. 


i  UNIV 

NG. 
X"£«k 


dollar  of  debt  charged  for'  schools.  Now,  if  you  charge  up  the 
interest  in  one  city  having  no  more  schoolhouses  than  the  other, 
you  are  enormously  swelling  the  school  exhibit  at  the  expense  of  the 
other  departments.  What  is  true  of  schools  you  will  find  true  of  other 
city  departments  as  between  different  cities.  I  see  the  necessity,  if 
you  are  to  have  a  true  accounting  relating  to  public  industries,  that 
you  must  not  simply  have  an  account  of  the  interest  on  the  debt  but 
the  interest  on  the  capital. 

Take  two  cities  with  waterworks,  each  costing  $100,000.  One  of 
the  cities  has  borrowed  the  money  and  has  carried  it  along  and  still 
owes  $100,000.  Another  city  has  paid  in  one  way  or  another,  by  rev- 
enues from  the  waterworks,  by  general  taxation,  by  special  taxation, 
or  otherwise,  $75,000  and  still  owes  $25,000.  If  we  are  to  get  com- 
parable statistics  relating  to  that  municipal  industry,  we  must  charge, 
not  in  the  one  case  the  city  owing  $25,000  and  in  the  other  the  one 
owing  $100,000,  but  we  must  bring  into  consideration  all  that  a  busi- 
ness man  would — the  full  interest  on  the  total  amount  of  the  cost  of 
the  concern.  We  should,  in  treating  municipal  industries,  charge  up 
in  that  account  for  the  final  and  correct  accounting  of  statistics  relat- 
ing to  it  the  full  amount  of  interest  on  the  capital,  and  not  that  which 
we  happen  to  find  for  the  time  being. 

Then  the  question  which  is  to  be  considered  as  the  interest  on 
account  of  schools  must  be  the  interest  on  the  same  basis,  not  upon 
the  incidental  or  accidental  amount  of  bonds  that  may  be  outstand- 
ing. This  is  determined,  not  by  any  relation  to  the  value  of  schools 
or  interest  on  the  school  debt,  but  by  little  political  exigencies  which 
have  resulted  in  a  large  amount  of  school  debt  for  one  city  and  a 
small  amount  for  another.  There  is  not  any  such  thing  as  economic 
and  financial  relations  between  the  purpose  of  a  debt  and  the  amount 
of  that  debt.  We  have,  as  I  look  at  it,  two  separate  lines  of  facts 
that  must  be  kept  in  mind  for  our  work.  First,  the  movement  of 
cash  and  the  purpose  for  which  that  cash  is  used  in  its  relation  to 
accounting ;  then  comes  the  accounting  proposition  for  the  industry. 
Now,  with  reference  to  the  other  matter,  we  have  not  yet  put  our 
accounts  upon  the  revenue  basis.  They  are  treated  as  cash  accounts. 
There  are  a  great  many  laws  relating  to  the  subject  that  we  have 
not  followed,  but  we  have  followed  the  cash  item  for  the  time  being. 
We  must  keep  it  uniform.  We  have  not  called  in  question  the  wis- 
dom of  a  revenue  system  of  accounts,  that  shows  the  interest  not 
according  to  its  payment,  but  according  to  its  accrual. 

Mr.  AUSTIN.  Is  it  not  a  fact  that  all  interest  upon  bonds  issued 
for  public  improvements  is  properly  a  part  of  the  capital  outlay — 
is  part  of  the  capital  invested  in  that  public  improvement — and 
should  therefore  be  charged  to  the  capital  account,  while  all  interest 


50  UNIFOEM    MUNICIPAL   ACCOUNTING. 

upon  bonds  issued  in  anticipation  of  taxes  is  a  part  of  your  every- 
day going  expenses,  and  should  be  charged  to  the  maintenance  of 
the  city  government  ? 

Mr.  BETZ.  I  think  we  are  bound  to  differ  a  great  deal  on  this  sub- 
ject; but  we  might  consider  it  from  the  standpoint  that  the  city  had 
no  money  to  operate  schools  with,  though  very  badly  needed,  and 
did  not  want  to  issue  bonds,  then  it  might  rent  a  building.  Now,  if 
such  a  city  were  paying  a  rental  and  charged  it  to  capital  outlay,  I 
think  it  would  be  quite  proper  to  charge  it  so.  Because,  if  you  raise 
a  million  dollars  for  sewers,  you  are  charging  for  the  repairs  to  those 
sewers,  and  the  interest  charged  is  part  of  what  those  sewers  are 
costing.  You  are  not  paying  any  rent,  but  that  is  charged  up  to 
maintenance  account.  If  a  man  buys  a  house  and  borrows  the 
money,  the  interest  he  pays  is  the  same  as  the  rent  he  would  be  pay- 
ing for  the  house.  It  seems  to  me  it  would  be  proper  to  charge  that 
to  capital. 

To  refer  again  to  claims  that  are  not  paid — special  revenues  that 
are  not  collected.  It  seems  to  me  that  the  main  idea  of  these  sta- 
tistics of  Bulletin  20  is  to  collect  data  that  are  actually  on 
hand,  relating  to  all  the  payments  which  have  actually  been  made 
in  that  one  year.  Now,  we  have  about  forty  million  dollars  of 
revenue  outstanding  that  we  are  not  going  to  be  able  to  collect. 
These  government  statistics  that  you  are  going  to  bring  up  should 
be  almost  absolutely  correct,  so  that  nobody  can  question  them. 
The  most  simple,  common,  everyday  man  should  understand  them. 
You  have  got  to  have  sharp  lines  drawn  if  you  want  to  have  statistics 
coincide.  I  think  we  ought  to  leave  out  possible  revenues  and 
possible  claims. 

Mr.  CHASE.  With  regard  to  that  question  of  interest,  it  is  cer- 
tainly an  exceedingly  important  one,  and  must  be  considered  as  an 
accounting  proposition.  I  would  like  to  make  a  statement  or  two, 
taking  the  two  propositions  which  are  set  forth  by  the  chairman. 
In  one  case,  the  city  builds  a  number  of  schoolhouses,  raising  the 
money  by  tax  levy;  in  the  other  case,  raising  the  money  by  bonds. 
In  the  latter  case  cities  are  apt  to  pay  interest  on  the  bonds;  and  in 
the  other  case,  they  do  not  pay  interest.  The  first  case  in  which  the 
money  was  raised  by  tax  levy  has  taken  so  much  money  out  of 
the  pockets  of  the  taxpayers  with  which  to  build  the  schoolhouses. 
Theoretically  the  people  in  that  community  have  large  interests  in 
that  money  which  was  taken  out  of  their  pockets  and  put  into  the 
schoolhouses. 

Therefore,  taking  the  community  as  a  whole,  the  proposition  is  as 
broad  as  it  is  long.  But,  taking  it  as  a  corporation,  the  corporation 
pays  interest  in  one  case  and  in  the  other  case  it  does  not.  This  is 
in  connection  with  municipal  industry,  which  will  be  taken  up  later, 


UNIFORM    MUNICIPAL   ACCOUNTING.  51 

but  which  I  may  touch  upon  now.  Interest  payments,  it  seems  to 
me,  should  be  looked  upon  as  charges  against  the  capital  and  not  as 
elements  of  expenditures,  using  the  word  " expenditures"  technically. 
After  all  elements  of  expense  have  been  charged  against  revenue, 
such  as  wages,  taxes,  depreciation,  guarantees,  damages,  etc.,  there 
are  left  expenditures  on  account  of  sinking  fund,  interest,  amortiza- 
tion of  franchises,  and  on  account  of  capital  as  separate  propositions 
to  be  handled  afterwards.  Interest  is  charged  up — interest  must  be 
charged  up — but  let  your  interest  account  come  after  a  comparison 
between  revenue  and  expenses.  Then  you  will  eliminate  any 
trouble  with  doubtful  quantities  which  have  to  be  handled  in  another 
way. 

Mr.  MACPHERSON.  One  gentleman  spoke  of  maintenance  of  public 
improvements  being  a  charge  against  capital.  Now,  it  seems  to 
me  that  there  is  room  for  division.  I  think  interest  on  public  im- 
provements in  the  nature  of  c6ntributions  by  taxpayers  in  a  special 
levy  is  a  proper  charge  against  capital,  because  it  was  not  contrib- 
uted out  of  the  general  funds;  but  interest  on  school  funds,  interest 
on  loans  against  tax  levies — interest  of  that  character  should  be 
charged  against  current  operations  and  not  capital. 

Mr.  AUSTIN.  I  think  I  made  that  distinction  in  my  remarks. 
Interest  on  all  loans  in  anticipation  of  taxes  or  similar  loans  should 
be  charged  to  running  expenses  or  maintenance  of  the  government. 

Mr.  TURNER.  Mr.  President,  I  did  not  intend  to  speak  at  all.  I 
dislike  to  disagree  with  people.  This  question  of  interest,  it  seems  to 
me,  should  be  treated  precisely  the  same  as  a  business  concern 
treats  interest.  You  buy  a  schoolhouse  and  have  not  the  money  to 
pay  for  it.  Charging  interest  to  capital  does  not  increase  the  value 
of  the  property  at  all.  It  seems  to  me  the  expense  for  interest  in  all 
cases  is  something  that  must  be  paid  in  order  that  we  may  live.  It 
seems  to  me  we  ought  to  charge  that  to  the  current  expenses. 

Mr.  CHASE.  I  understand  this  is  for  comparison. 

Mr.  TURNER.  Simply  charging  interest  to  the  capital  account  on 
public  improvements,  as  the  word  has  been  used,  or  on  any  proposi- 
tion where  you  buy  property. 

Mr.  CHASE.  I  think  the  auditor  of  Massachusetts  is  quite  safe, 
but  in  the  statement  we  handle  it  exactly  as  private  corporations 
handle  it.  I  think  he  makes  it  quite  narrow,  because  public  corpora- 
tions charge  all  interest  during  construction  to  capital  account; 
when  completed,  it  becomes  a  part  of  the  corporation  cost. 

The  CHAIRMAN.  Only  until  they  begin  to  operate  it. 

Mr.  TURNER.  Talking  about  schoolhouses — if  we  have  not  the 
money  to  build  schoolhouses,  we  have  not  spent  it. 

Mr.  CHASE.  But  the  principal. 


52  UNIFORM    MUNICIPAL   ACCOUNTING. 

Mr.  TURNER.  On  a  twenty-year  loan,  such  a  contract  is  all  you 
want  in  anticipation  of  completion,  whatever  the  improvement 
may  be. 

Mr.  CHASE.  But  during  the  period  of  construction  would  your 
interest  be  charged  against  the  cost  of  the  schoolhouse  ? 

Mr.  TURNER.  I  do  not  think  the  schoolhouse  would  be  worth  any 
more  if  you  add  interest  to  cost.  It  is  not  done  by  private  corpora- 
tions. 

Mr.  CHASE.  All  private  corporations? 

Mr.  TURNER.  All  street  railroads  and  the  corporations  that  I  am 
familiar  with. 

Doctor  CLEVELAND.  In  respect  to  the  remarks  by  Mr.  Austin,  it 
seems  to  me  that  he  is  in  this  situation:  If  he  adds  interest  to  his 
cost  of  general  improvement,  the  same  as  he  would  on  construction, 
he  would  have  an  increasing  valuation  on  streets,  etc.  In  other 
words,  he  would  have  a  situation  such  as  I  found  a  few  days  ago  in  an 
institution.  An  amount  had  been  given  to  it  which  was  invested 
and  the  income  used  for  the  purposes  of  the  asset.  Well,  they  in- 
vested it  and  charged  up  a  certain  amount  of  interest.  They 
increased  their  capital  fund  every  year,  and  they  had  this  growing  at 
the  rate  of  $2,000  every  year.  Now,  it  seems  to  me  that  is  Mr. 
Austin's  proposition  on  general  improvements — adding  your  cost 
every  year. 

Mr.  Chairman,  you  raise  the  question,  whether  or  not  you  would 
charge  up  interest  on  a  building  that  has  been  paid  for.  We  will 
suppose  a  schoolhouse  has  cost  $100,000  and  the  community  paid 
for  it.  Now,  what  has  it  done  that  for  ?  In  order  that  it  may  reduce 
its  current  expenses — the  expenses  of  capitalization  of  the  school. 
They  have  taken  the  money  out  of  their  pockets  and  put  it  into  the 
schools.  If,  in  their  opinion,  they  can  take  money  out  of  their  pockets 
to  a  greater  advantage  than  they  can  borrow  it,  they  will  take  it  out  of 
their  own  pockets;  but  how  are  they  to  determine  whether  it  is  for 
their  advantage?  The  only  way  they  can  do  is  not  to  charge  up 
interest  on  that.  The  only  way  they  can  get  rid  of  that  is  to  declare 
an  income  on  the  other  side.  Here  on  one  side,  income,  and  exactly 
the  same  expense,  one  declared  as  a  dividend  and  the  other  set  up  as 
a  counter  entry.  Now,  the  question  after  all  comes  down  to  this: 
What  do  we  want  to  know?  Don't  we  want  to  know  relative  costs 
of  operation?  Take  an  electric  light  plant,  take  a  school;  don't  we 
want  to  know  what  is  the  cost  of  operating  that  school,  and  whether 
or  not  we  are  economical  in  our  administration?  Therefore,  from  a 
point  of  view  of  municipal  economy,  we  can  eliminate  those  property 
expenses  and  come  right  down  to  the  cost  of  operation,  of  salaries, 
of  repairs,  of  maintenance,  cost  of  equipments,  schoolbooks  and  sup- 
plies, and  things  of  that  kind.  In  other  words,  if  you  get  down  to 


UNIFORM    MUNICIPAL   ACCOUNTING.  53 

administration  accounts,  you  are  apt  to  confuse  the  minds  of  the 
readers  and  tangle  the  administration. 

The  CHAIKMAN.  That  is  a  proposition  of  which  we  are  going  to 
speak.  I  brought  the  matter  up  that  it  might  be  discussed. 

Mr.  WATSON.  Now,  see  if  you  understand  this  as  I  do.  This 
question  was  raised  only  to  give  the  Census  Bureau  a  hint  of  what 
we  thought  of  the  question  which  we  have  discussed,  and  what  our 
citizens  or  our  cities  might  think  of  it.  What  you  want  is  instruc- 
tion as  to  how  you  ought  to  proceed. 

Mr.  BETZ.  If  one  city  has  a  water  plant  with  a  million  dollar  debt 
against  it,  and  another  has  twenty-five  million  dollars  against  it,  let 
the  other  find  out  how  the  first  city  has  paid  that  off. 

Doctor  CLEVELAND.  That  is  my  point,  with  this  condition :  that  if 
you  put  up  the  expense  on  property  expenses  here,  in  addition  to 
your  operating  expenses,  you  will  show  not  only  the  economy  in 
the  expenses  of  administration,  but  the  economy  in  the  property 
expense,  which  has  to  be  accounted  for  in  your  asset  and  liability 
statistics. 

Mr.  BAKER.  I  wish  to  say  a  few  words  as  to  the  use  to  which  these 
statistics  are  to  be  put.  There  are  a  large  number  of  engineers  and 
superintendents  of  public  works  who  have  to  consider  the  cost  of  the 
public  service.  The  discussion  thus  far,  to  a  very  large  extent,  has 
been  from  the  viewpoint  of  the  accountant,  who  is  responsible  for 
giving  an  account  of  certain  moneys  received  and  paid  out,  and  who 
looks  upon  this  question  more  largely  from  the  standpoint  of  book- 
keeping than  the  engineers.  Now,  as  you  all  know,  the  engineer  is 
looked  to,  to  give  some  guidance  to  a  municipality  as  to  what  a  given 
public  improvement  would  cost,  and  as  to  what  it  would  cost  both  in 
construction  and  in  operation.  It  is  absolutely  essential  to  differenti- 
ate completely  and  accurately  the  cost  of  construction  and  the  cost  of 
operation,  if  we  are  going  to  have  any  municipal  statistics  that  are  of 
any  use  whatever  to  the  engineer,  and  he  wants  the  statistics  for  the 
taxpayer.  It  is  the  interest  of  the  taxpayer  that  we  are  all  trying 
to  serve.  Now,  I  repeat,  we  can  not  get  any  statistics  that  are  worth 
the  paper  they  are  printed  on  until  we  actually  separate  construction 
costs,  capital,  and  also  operating  expenses. 

Now,  you  gentlemen  who  are  accountants  can  call  those  things  any- 
thing you  please,  as  seems  best  for  your  purposes,  so  long  as  we  can 
pick  out  and  combine  and  can  know  on  which  hand  to  put  these  two 
relative  classes  of  expense.  Coming  now  to  the  specific  problems  of 
schools  and  speaking  of  that  somewhat  from  the  standpoint  of  tax- 
payers: The  board  of  education  is  continually  confronted  with  the 
problem  of  getting  money  enough  to  run  those  schools  in  accordance 
with  its  ideal  and  their  high  standing.  Every  once  in  a  while  some 
one  comes  along  with  comparative  statistics  and  tries  to  prove  that 


54  UNIFOKM    MUNICIPAL    ACCOUNTING. 

the  cost  of  the  schools  in  Montclair  is  higher  than  in  the  surrounding 
municipalities.  I  make  no  boast  of  the  way  the  accounts  are  kept; 
I  have  not  looked  into  it;  but  if  it  were  to  appear  that  the  cost  of  the 
schools  in  Montclair  is  higher  than  in  any  of  the  surrounding  com- 
munities, we  must  know  not  only  the  operating  expenses — the  amount 
paid  out  for  capital,  salaries,  and  general  services,  etc. — but  we  must 
know  the  interest  charges  on  school  buildings.  It  may  be  that  our 
board  of  education  is  extravagant  in  the  class  of  buildings  it  provides, 
and,  as  it  happens,  that  is  true.  They  are  culpable  for  building  very 
artistic  schoolhouses.  Now,  we  must  know  the  interest  charges  on 
those  school  buildings.  If  those  interest  charges  come  into  the  gen- 
eral fund,  we  have  lost  an  important  element  in  our  system  of  com- 
parison. Every  public  industry  should  stand  on  its  own  ground,  so 
should  every  class  of  municipal  improvement;  and  in  order  that  we 
may  know  that  they  are  so  standing,  it  is  absolutely  necessary  that  we 
differentiate  continually,  completely,  and  accurately  one  from  the 
other. 

Mr.  AUSTIN.  Mr.  Chairman,  what  seems  to  have  been  taken  as  a 
proposition  was  put  in  the  form  of  a  question,  and  I  had  no  opinion 
on  the  matter  myself  at  that  time.  Since  then  the  continual  roasting 
I  have  had  in  two  or  three  directions  has  simply  changed  my  question 
into  an  opinion.  I  still  think  that  the  interest  on  a  public  improve- 
ment is  not  a  part  of  the  running  expenses  of  the  government  at  all, 
but  is  a  part  of  the  cost  of  that  improvement.  If  you  choose  to  pay 
for  your  improvement  in  installments,  it  will  cost  you  more;  if  you 
choose  to  pay  it  all  at  once,  it  does  not  cost  you  so  much.  There  is  a 
difference  between  cost  and  value. 

Mr.  CHASE.  I  would  like  to  ask  the  gentleman  a  question.  Bonds 
are  issued  for  $5,000,  with  interest  payable  annually;  and,  in  another 
instance,  bonds  are  issued  for  $50,000  to  build  a  schoolhouse,  interest 
payable  annually.  Should  the  interest  in  both  cases  be  charged 
against  the  assets  of  these  school  buildings;  and  if  so,  where  should 
it  go? 

Mr.  AUSTIN.  I  think  in  both  cases  it  should  be  charged  against 
school  buildings  as  outlays. 

Doctor  CLEVELAND.  The  reason  which  you  give  makes  it  clear  that 
one  should  pay  this  from  current  income  or  current  revenue.  Now, 
if  a  city  pays  it  as  a  capital  outlay,  you  do  not  expect  to  raise  capital 
to  pay  off  the  same.  If  you  are  going  to  make  it  a  current  charge — 
that  is,  an  expense — then  you  must  meet  it  from  current  revenue. 

Mr.  MAC!NNES.  All  statistics  should  be  as  clear  as  possible  as  to 
what  the  comparative  cost  has  been.  Is  not  that  the  principal  aim 
of  the  Census  Bureau? 

The  CHAIRMAN.  That  is. 


UNIFOKM    MUNICIPAL   ACCOUNTING.  55 

Mr.  MAC!NNES.  What  we  are  trying  to  determine  is  the  relative  cost 
of  conducting  the  business  of  one  department  in  comparison  with  that 
of  conducting  the  business  of  another.  It  does  not  seem  best  to 
engage  wholly  in  splitting  hairs  on  the  question  whether  interest 
which  you  pay  on  bonds  is  to  be  divided  among  school  bonds,  or 
street  paving  bonds,  or  street  betterment  bonds,  etc.  The  interest 
on  such  burdens  is  absolutely  a  part  of  your  maintenance  expense. 
We  have  got  to  distinguish  between  the  public  enterprise,  such  as  the 
subway  in  New  York,  which  meets  the  interest  on  these  bonds  from 
its  revenue,  and  the  schoolhouse,  which  we  have  erected  for  the  purpose 
of  educating  our  children  and  which  will  never  be  anything  more  to 
us  than  a  public  expense.  Every  year  it  will  be  an  expense — it  is  a 
part  of  the  expense  for  the  education  of  our  children.  Is  the  interest 
on  those  bonds  and  the  provisions  you  make  for  sinking  funds  a  part 
of  the  expense  of  general  administration  ?  It  is  a  part  of  the  expense 
of  that  particular  school. 

If  the  Census  Bureau  should  endeavor  to  segregate  interest  on  sewer 
bonds,  school  bonds,  etc.,  we  might  as  well  try  to  follow  the  trail  of 
the  sandhill  stag.  What  value  would  statistics  such  as  these  be  to  us  ? 
It  seems  to  me  that  the  value  of  these  statistics  would  be  the  greater 
the  better  they  show  the  administrative  cost.  The  average  interest 
on  their  debt  would  indicate  the  city's  credit,  and  it  would  be  appar- 
ent to  my  mind  that  the  city  had  not  issued  these  bonds  for  school- 
house  purposes  and  given  a  mortgage  on  the  schoolhouse  itself.  The 
schoolhouse  is  not  going  to  meet  the  expense.  It  is  a  part  of  the 
expense  and  it  should  not  be  classed  in  the  same  category  as  enter- 
prises instituted  for  the  purpose  of  making  the  revenue  meet  the  cost. 
It  is  proper  to  include  the  interest  with  the  cost  up  to  the  time  that  the 
period  of  operation  is  reached.  As  soon  as  the  period  of  operation  is 
reached  the  interest  becomes  an  expense.  It  seems  to  me,  Mr.  Chair- 
man, that  the  statistics  that  your  Bureau  is  compiling — and  it  seems 
to  me  that  they  have  been  intelligently  compiled — should  be  conducted 
along  a  reasonable  path — a  path  that  leads  to  something  in  the  end, 
as  interest  on  bonded  debt.  The  method  of  comparing  the  rate  of  that 
interest  with  the  rate  of  other  cities  would  be  the  best.  We  would 
then  get  statistics  that  would  mean  something.  In  the  early  part  of 
the  discussion  Mr.  Beck,  of  Detroit,  I  think  referred  to  the  sinking 
fund  created  for  the  purpose  of  paying  interest. 

Mr.  BECK.  I  did  not  say  that  we  did. 

Mr.  MAC!NNES.  There  can  be  no  such  thing  as  a  sinking  fund  for 
the  purpose  of  paying  interest  on  debt.  It  is  a  yearly  charge.  In 
the  city  of  New  York  we  have  a  sinking  fund  for  the  paying  of  interest 
on  debt.  It  is  a  misnomer;  it  is  not  a  sinking  fund.  It  is  a  fund  for 
paying  interest  direct  from  the  taxpayer.  It  is  simply  a  fund  into 
which  various  revenues  are  paid.  But  to  prevent  confusion  of  one 


56  UNIFOBM    MUNICIPAL   ACCOUNTING. 

thing  with  another  the  creating  of  a  sinking  fund  for  that  purpose  was 
done.  I  have  brought  this  before  you,  Mr.  Chairman,  simply  for  the 
purpose  of  illustrating  something  which  was  in  reality. 

Mr.  BECK.  Just  a  word.  An  illustration  of  the  means  of  distinguish- 
ing between  " capital  stock"  and  the  "  operating  expenses."  There  is 
a  relation  between  them  which  is  very  commonly  overlooked.  If  a  city 
should  buy  a  pumping  engine,  the  cost  of  which  is  a  hundred  thou- 
sand dollars,  the  capital  charges  would  be  high  on  that  account ;  also 
the  interest  on  indebtedness.  It  can  buy  another  pumping  engine 
for  $50,000  which  will  pump  an  equal  amount  of  water,  but  the 
operating  expenses  will  be  greater  in  this  instance.  There  is  not 
much  difference  in  their  earnings.  This  is  also  true  of  public  improve- 
ments, to  a  greater  or  less  extent,  and  would  apply  to  a  school  build- 
ing if  the  school  building  were  on  as  large  a  scale  as  a  lighting  plant. 

Doctor  CLEVELAND.  I  want  to  say  one  word  in  reply  to  Mr.  Mac- 
lnnes's  remarks.  Mr.  Maclnnes  would  exclude  the  amortization  and 
sinking  fund  charges  from  expense.  In  other  words,  he  has  the  same 
idea  of  expense  that  has  been  expressed  before.  He  would  make  the 
fixed  charges,  as  he  states  them,  the  interest  charge  on  capital  or  on 
bonds,  etc.,  for  permanent  improvements.  He  would  convert  that 
into  one  account,  and  then  he  would  have  another  operating  account 
which  would  be  kept  for  disbursements  for  certain  items  in  depart- 
ments. When  speaking  of  cost,  all  of  us  would  have  the  cost  of  admin- 
istration in  mind — that  is,  the  operation  of  the  department,  or  what- 
ever it  might  be,  which  had  to  do  with  salaries,  repairs,  supplies,  etc. 
That  is,  part  of  us  would  have  classified  accounts  and  fixed  charges, 
and  Mr.  Maclnnes  would  have  only  one  account,  the  fixed  charges. 

Mr.  MAC!NNES.  I  did  not  speak  of  public  enterprises.  I  did  not 
touch  on  that.  We  are  quite  in  agreement  on  public  utilities.  It  is 
only  a  question  of  governmental  activities.  Where  a  city  has  a  total 
fixed  charge  of  $100,000  the  question  arises,  How  is  that  to  be 
accounted  for?  There  is  a  charge  of  a  hundred  thousand  dollars  on 
account  of  capital  charges,  expenditure  for  fire  houses,  etc.  There 
is  a  charge  of  another  hundred  thousand  dollars  on  account  of  street 
paving;  another  charge  of  a  hundred  thousand  dollars  on  account  of 
sewers.  In  order  that  we  might  have  before  us  a  picture  which 
represents  our  expenses  for  all  operation,  and  our  expenses  on  account 
of  capital  investment,  we  would  charge  the  same  way  that  we  would 
charge  expenses,  in  the  same  way  that  we  would  in  case  of  a  gas  plant — 
for  the  expenses  of  operation,  so  much ;  capital  and  operation  charges, 
so  much.  We  would  charge  it  to  capital  expense,  for  it  is  not  an 
expense  account ;  it  is  entered  in  property  expense ;  it  would  be  like 
earnings;  like  insurance  or  interest;  that  is,  a  capital  expense.  If 
you  pay  insurance,  you  would  put  it  in  your  property  expense.  If  you 


UNIFORM    MUNICIPAL   ACCOUNTING.  57 

pay  interest,  you  would  put  it  in  the  same  expense.  Now,  you  put 
your  property  tax  into  property  expense  and  then  you  are  able  to 
compare  one  city  with  another  and  see  how  one  city  is  saving  by  the 
taxpayer  going  down  into  his  pockets.  ^ 

Mr.  BECK.  I  want  to  ask  for  information  on  a  particular  point. 
The  matter  has  come  up  in  discussion  to-day  and  I  think  the  infor- 
mation would  be  particularly  interesting.  I  would  like  to  have 
shown  the  rates  of  interest  received  by  the  various  cities. 

The  CHAIRMAN.  I  will  say  with  reference  to  that,  that,  we  give 
interest  from  all  other  sources,  which  include  the  interest  on  balances 
and  miscellaneous  sources.  If  it  is  desired,  we  can  (we  can  not  do  it 
for  1904,  but  we  can  for  1905)  show  not  only  the  gross  amount,  but 
easily  ascertain  the  rate  of  gross  per  cent.  We  have  not  shown  that, 
but  Mr.  Beck  has  brought  out  a  question  along  a  line  that  I  am  very 
anxious  to  remedy.  We  appreciate  the  value  of  such  a  statement, 
and  we  want  to  know  what  you  are  anxious  to  know.  We  do  not 
furnish  that  information,  but  if  it  is  desired,  we  want  to  furnish  it. 
Now,  then,  give  us  as  many  such  facts  as  you  can  and  you  will  make 
this  conference  not  only  very  interesting  to  us,  but  will  enable  it 
through  us  to  make  the  future  bulletins  more  interesting  to  you. 

Mr.  HENDERSON.  It  occurs  to  me  that  it  would  be  pardoned  if  I 
were  to  ask  a  few  questions  as  to  the  rate  of  interest  that  is  being 
paid  upon  bonds  issued  by  the  municipalities.  I  found  in  the  dis- 
cussion that  cities  of  relatively  the  same  size,  and  perhaps  without 
much  difference  as  to  general  resources,  were  paying  a  different  rate 
of  interest  on  their  bonds. 

The  CHAIRMAN.  I  should  say,  Mr.  Henderson,  with  reference  to 
that,  that  the  next  bulletin,  which  is  for  1904,  will  give  the  amount 
for  each  city,  the  rate  of  interest,  and  the  actual  interest  charged. 

Mr.  BECK.  I  do  not  think  you  quite  catch  Mr.  Henderson's  point. 
The  question  as  raised  by  him  is  this :  What  is  the  rate  of  interest  of 
the  bonds  in  comparison  with  the  interest  basis  upon  which  the  bonds 
are  sold? 

Mr.  SHEPARD.  I  do  not  know  whether  you  want  any  suggestion  or 
not — whether  we  have  time  for  any  suggestion  or  not. 

The  CHAIRMAN.  Yes,  we  will  take  the  time. 

Mr.  SHEPARD.  Although  I  have  looked  over  Bulletin  20  quite  care- 
fully, nevertheless  I  am  like  some  of  the  other  gentlemen,  I  have  not 
read  it  from  cover  to  cover;  but  it  seems  to  me  the  average  taxpayer 
is  more  interested  possibly  in  his  own  city  figures.  What  does  it  cost 
a  man  who  owns  a  piece  of  property  assessed  at  100  per  cent  and  the 
valuation  being  $10,000 — what  does  it  cost  him  if  he  lives  in  Chicago, 
New  York,  or  Cleveland,  for  city,  county,  and  state  taxes?  Now,  the 
statistics  of  cities  do  not  mean  much  if  we  do  not  bring  in  the  county, 


58  UNIFORM    MUNICIPAL    ACCOUNTING. 

as  in  Chicago,  or  if  we  do  not  mention  something  about  the  state. 
A  taxpayer  is  interested  in  what  it  would  cost  him  if  he  owned  prop- 
erty in  half  a  dozen  different  states — what  it  would  cost  him  for  all 
these^taxes.  Now,[that  may  be  a  tremendous  undertaking;  but  after 
all,  how'are  we  going  to  prepare  the  tax  rate  so  as  to  be  of  real  value 
unless  we  can  get  down  to  the  total  taxes  a  man  pays. 

Mr.  HENDERSON.  Do  you  not  refer  to  the  number  of  mills  on  the 
dollar? 

Mr.  SHEPARD.  Yes,  sir. 

The  CHAIRMAN.  With  reference  to  that,  we  hope  ultimately  to  bring 
into  these  figures  all  the  taxes.  Most  of  you  who  are  accountants 
understand  all  the  complicated  organizations  that  exist  in  most  of 
your  New  England  sections.  We  have  met  with  a  great  many  organi- 
zations which  run  one  through  the  other,  the  township  and  the  school 
district,  the  fire  district,  for  instance,  and  it  is  sometimes  very  difficult 
to  work  out  the  problem;  but  we  have  it  in  mind.  It  has  been  sug- 
gested by  one  of  our  brightest  men,  Professor  Farlie,  that  it  is  one  of 
the  things  that  we  should  set  ourselves  to  do,  and  it  is  one  of  the  things 
that  we  have  in  mind.  We  are  engaged  in  determining,  as  far  as  pos- 
sible, the  true  ratio  between  assessed  valuation  and  the  correct  value 
of  property  in  a  given  city.  Until  we  have  some  basis  on  which  we 
can  measure  the  cost  of  this  thing,  and  that,  and  the  other,  we  can 
not  tell  how  much  the  burden  of  taxation  is  upon  a  given  man  or 
upon  a  given  amount  of  property,  say  ten  thousand  dollars.  You 
mayjstate  that  ten  thousand  dollars  is  the  assessed  valuation,  but 
with  that  valuation  in  Chicago  at  11  per  cent,  while  in  Boston  it  is  100 
per  cent,  it  becomes  a  very  difficult  proposition. 

Doctor  HARTWELL.  As  to  comparative  per  capita  statistics,  I 
would  suggest  that  the  Chicago  figures  be  printed  in  red  ink,  because 
in  them  we Jiave  a'stumbling  block  that  makes  trouble  for  the  tyro 
in  statistics.  You  find  what  seems  an  enormous  tax  rate  till  you 
learn  that  it  is  based  on  an  attenuated  assessed  valuation.  The  Chi- 
cagoan's  burdens  are  laid  upon  him  by  a  large  and  grotesque  group  of 
taxing  bodies,  sanitary  and  park  districts,  South  Town,  North  Town, 
Cook  County,  and  the  like.  The  Chicagoan  knows  what  it  all  means; 
but  the  Bostonian,  whose  state,  county,  and  city  taxes  are  all  ren- 
dered in  one  bill,  does  not  understand  it  and  is  apt  to  grumble  when 
the  tax  rate  of  Chicago,  as  it  is  usually  stated,  is  compared  with  his 
own.  Unless  one  knows  something  about  the  assessment  systems 
and  the^bewildering  variety  of  urban,  semiurban,  and  rural  communi- 
ties connoted  by  "  Chicago,"  the  comparison  of  per  capita  expendi- 
tures in  Chicago  and  other  American  cities  tends  to  misleading  con- 
clusions. Per  capita  comparisons  between  cities  is  a  widespread  and 
frequently  ill-advised  habit  in  this  country. 


UNIFORM    MUNICIPAL   ACCOUNTING.  59 

I  would  suggest  to  the  Census  Bureau  that  it  does  not  indulge  in 
per  capita  comparisons  except  in  census  years,  when  a  reasonably 
accurate  count  of  the  living  inhabitants  is  taken.  The  Census  Bureau, 
I  venture  to  say,  is  not  capable  of  showing  the  actual  rate  of  increase 
in  intercensus  years  in  a  very  large  percentage  of  the  municipalities, 
either  on  the  basis  of  the  estimate  which  it  has  adopted,  namely,  the 
arithmetical,  or  upon  that  of  geometrical  increase.  The  growth  rates 
of  American  cities  vary  so  much  from  one  another,  and  so  much  in  the 
case  of  individual  cities  from  year  to  year,  or  at  least  from  half  decade 
to  half  decade,  that  per  capita  comparisons  in  intercensus  years  are 
apt  to  be  of  little  value,  as  is  also  the  case  with  comparative  death 
rates. 

In  estimating  the  burden  of  debt  upon  a  community,  or  the  burden 
of  debt  upon  individuals  in  a  community,  I  have  come  to  consider 
that  the  ratio  of  debt  to  valuation  (you  can  standardize  your  valua- 
tion) is  a  fairer  criterion  of  the  burden  of  debt  than  per  capita  state- 
ments, which  are  based  upon  rates  which  may  have  been  correct  five 
or  ten  years  ago,  but  which  may  not  be  correct  at  the  present  time,  and 
that  the  next  census  may  clearly  show  to  be  incorrect. 

While  I  am  on  my  feet  there  is  another  point  which  I  would  like  to 
bring  up.  Attention  has  been  called  to  the  fact  that  the  rates  of 
interest  paid  by  municipalities  having  approximately  the  same  bonded 
debt  differ  widely.  There  is  another  element  in  determining  the 
relative  cost  of  administration,  and  that  is  the  size  of  salaries  paid  to 
city  officials  of  the  same  class.  They  vary  as  well  as  rates  of  interest 
and  they  vary  greatly.  If  the  Census  Bureau  were  to  show  the 
local,  popular  estimate  of  the  value  of  the  services  of  mayor,  city 
councilmen,  and  aldermen,  in  the  several  cities  by  stating  the  indi- 
vidual salaries  paid  in  each  class,  it  would  shed  a  certain  amount  of 
light  upon  their  local  valuation.  But  unless  one  knows  the  general 
scale  of  salaries  that  bank  clerks,  laborers,  foremen,  etc.,  get  in  the 
different  towns,  we  can  not  tell,  really,  whether  the  civil  servants 
are  overpaid  or  underpaid  in  comparison  with  those  of  another  city. 
In  estimating  the  cost  of  administration  of  different  cities  some 
regard  should  be  given  to  the  purchasing  power  of  money  in  those 
cities.  According  to  my  observation  and  experience  it  varies  con- 
siderably even  in  our  leading  cities.  In  arriving  at  a  sound  basis 
for  comparisons  it  is  necessary,  also,  to  know  whether  departments 
bearing  the  same  name  perform  the  same  kinds  of  service  and  no  other 
or  not.  For  instance,  Baltimore  has  a  board  for  licensing  the  sale 
of  intoxicating  liquors  in  addition  to  its  board  of  police.  In  Louis- 
ville, if  I  am  correctly  informed,  licenses  are  issued  by  the  sinking 
fund  commissioners.  In  Boston  the  board  of  police  acts  also  as  a 
licensing  board.  Comparisons,  per  capita  or  otherwise,  as  to  the  cost 


60  UNIFORM    MUNICIPAL   ACCOUNTING. 

of  police  protection  in  those  three  cities  would  manifestly  be  unsatis- 
factory unless  the  differences  in  service  rendered  were  taken  into 
account  in  determining  the  basis  for  comparison.  Budding  states- 
men and  amateur  publicists  are  bound  to  use  the  tables  of  Bulletin  20 
and  its  successors  in  ever  increasing  numbers.  My  plea  is  that  pit- 
falls and  stumbling  blocks  should  not  be  left  unnoted.  %, 

Mr.  WILLIAMS.  I  would  like  a  little  more  detailed  information  as 
to  receipts  from  licenses,  fines,  and  fees.  I  know  that  awhile  ago 
when  I  was  checking  up  the  items  in  Rochester  I  found  that  we  did 
not  seem  to  get  as  much  from  them  as  other  people  do,  and  I  want 
to  know  why.  If  we  knew  just  what  the  other  cities  receive  from 
the  source  detailed  here,  we  might  learn  why  others  receive  so  much. 

The  CHAIRMAN.  The  same  suggestion  has  been  made  by  a  dozen 
different  cities  and  while  we  can  not  give  it  for  the  year  1904,  the 
matter  is  in  contemplation  for  J  905. 

Mr.  BECK.  Now,  another  point.  Receipts  from  liquor  licenses: 
In  Detroit  the  city  gets  a  portion  of  the  tax  on  liquor  licenses. 

Mr.  BAKER.  Mr.  Chairman,  I  wish  to  call  attention  to  the  fact  that 
the  picture  of  tax  rate  and  of  indebtedness  is  incomplete  unless  one 
takes  into  account  the  extent  to  which  municipal  ownership  prevails 
in  the  respective  communities.  In  our  city  budget,  for  instance, 
nothing  appears,  not  even  the  waterworks,  electric  light  works,  etc. 
Therefore,  in  order  to  complete  the  picture,  all  such  matters  must 
be  taken  into  account.  Another  important  thing  that  has  a  bearing 
upon  relative  tax  rates  and  indebtedness  is  the  extent  to  which 
special  assessments  for  public  improvements  appear.  Of  course, 
while  we  all  understand  these  things,  the  fact  is  that  we  wish  to  get 
them  upon  the  record.  I  wish  to  urge  again,  in  the  interest  of  city 
officials,  as  well  as  the  accountants,  that  the  Census  Bureau,  as 
rapidly  as  it  can  see  its  way  to  do  it,  give  us  more  of  the  diversified 
statistics  of  cities  than  are  found  in  Bulletin  20,  or  in  any  of  the 
bulletins  preceding  it,  or  in  all  the  bulletins  issued  by  the  Department 
of  Commerce  and  Labor.  Other  classes  of  statistics  are  needed. 
Data  for  many  of  them  are  not  so  difficult  to  obtain  as  the  financial 
statistics  which  are  given. 

The  CHAIRMAN.  Another  question  which  it  is  desirable  to  answer, 
not  only  for  the  division  over  which  I  have  charge,  but  for  the  other 
divisions  as  well:  Should  these  statistics  be  published  every  year? 

Mr.  BAKER.  I  have  not  thought  very  much  about  that  question, 
and  might  wish  to  revise  any  point  I  may  give  at  this  moment;  but 
I  should  say  offhand  that  it  would  be  better  to  give  a  wider  range 
once  in  two  or  three  years  than  it  would  be  to  give  a  narrower  range 
every  year. 

Mr.  SHEPARD.  There  is  a  chance  for  difference  oFopinion  on  that 
subject.  The  average  man,  who  is  not  up  in  statistics,  will  find 


UNIFORM   MUNICIPAL   ACCOUNTING.  61 

that  a  large  volume  is  very  misleading  and  incomprehensible.  It 
seems  to  me  that  certain  subjects  to  be  treated  should  be  placed  in  a 
smaller  volume,  so  that  it  would  be  more  intelligible  to  the  average 
man.  If  you  will  pardon  me,  just  one  other  suggestion.  In  many 
cities  there  is  a  great  deal  of  discussion  as  to  whether  the  police  are 
on  the  basis  of  two  patrols,  or  whether  the  firemen  are  on  the  basis 
of  one  patrol  or  two.  For  instance,  comparing  Cleveland  with  Buf- 
falo. The  expenses  of  the  police  in  Buffalo  are  possibly  $700,000; 
and  in  Cleveland,  $465,000.  It  indicates  at  once  a  tremendous  cost 
for  Buffalo,  yet  we  have  a  three  patrol  system  of  police,  while  they 
have  the  two  patrol  system  in  Cleveland.  That,  therefore,  makes  a 
large  difference  in  the  cost  of  our  police  and  our  firemen.  Our  police 
and  firemen  are  now  claiming  that  they  ought  to  have  only  twelve 
hours  on  duty  and  twelve  hours  off  duty,  and  it  is  becoming  quite 
a  serious  proposition  with  us,  and  I  would  suggest  that  such  fact 
should  be  set  forth,  because  it  makes  a  great  difference  in  the  cost 
of  the  police  and  fire  forces. 

The  CHAIRMAN.  I  will  make  an  announcement  before  we  go  fur- 
ther and  that  is  that  the  President  will  receive  the  members  of  this 
conference  to-morrow  at  12  o'clock.  We  shall  need  to  leave  here 
about  twenty  minutes  before  12,  so  that  we  may  be  promptly  at 
the  White  House  at  the  hour  set. 

There  has  been  a  suggestion  that  the  evening  session  be  given  up 
to  fiscal  officers  alone.  Before  the  meeting  of  the  conference  there 
was  a  suggestion  that  the  fiscal  officers,  who  meet  here,  discuss  the 
desirability  of  a  permanent  organization  of  such  officers.  It  was 
thought  at  one  time  that  they  might  desire  to  devote  a  third  day  to 
such  a  meeting.  Arrangements  were  made  to  secure  this  room,  but 
as  many  desire  to  go  away  to-morrow  night,  it  has  been  suggested 
that  the  fiscal  officers  meet  to  discuss  that  question  to-night.  The 
question  of  adjournment  will  be  left  for  the  gentlemen  present  to 
decide;  whether  we  will  have  an  evening  session  or  adjourn  until 
to-morrow  morning  and  give  the  evening  and  to-night  to  the  fiscal 
officers. 

Mr.  HENDERSON.  Mr.  Chairman,  before  we  adjourn  this  afternoon, 
I  want  to  bring  up  a  matter  of  importance  that  is  not  contained  in 
Bulletin  20,  for  the  simple  reason  that  it  is  impossible  to  secure  the 
information.  I  do  not  know  how  it  may  be  in  the  East,  but  in  the 
West,  the  middle  West,  and  the  Pacific  coast,  there  is  a  cry  going  up 
from  the  municipalities  for  municipal  regulation  or  municipal  owner- 
ship, and  all  kinds  of  figures  and  theories  are  set  forth.  Some  are 
so  unkind  as  to  say  that  the  persons  who  advocate  such  measures  are 
demagogues.  Now,  there  is  absolutely  no  source  that  is  reliable 
from  which  to  obtain  the  information  that  is  sought  to-day  by  thou- 
sands of  municipalities  in  the  United  States  touching  the  manage- 


62  UNIFORM   MUNICIPAL   ACCOUNTING. 

ment  of  public  service  industries  under  individual  ownership  or  pri- 
vate corporations,  and  under  public  corporations.  Director  North, 
this  morning,  alluded  to  this  matter  in  his  paper,  and  pointed  directly 
to  the  fact  that  there  were  no  means  provided  whereby  this  informa- 
tion could  be  obtained.  It  seems  to  me  that  this  conference  can 
accomplish  something  looking  toward  a  determination  of  this  matter. 
This  is  a  time  when  the  people  of  the  United  States  are  doing  things. 
The  private  corporations,  I  believe,  will  have  no  objections  to  fur- 
nishing the  information  that  may  be  asked  for  by  the  Census  Bureau, 
if  there  is  a  law  requiring  them  to  furnish  that  information.  In  fact, 
I  am  not  sure  that  you  require  a  law.  Neither  will  these  municipal- 
ities have  any  objection  to  furnishing  such  information,  provided 
that  uniform  blanks  and  forms  for  making  returns  are  furnished.  I 
mention  this'  matter,  Mr.  Chairman,  because  I  believe  that  only 
through  the  Census  Bureau  can  this  relief  come.  If  your  department 
be  the  department  through  which  this  relief  must  come,  then  I  believe 
the  time  is  at  hand  when  a  beginning  should  be  made.  I  mention 
it  so  that  we  may  discuss  the  subject  before  we  adjourn. 

The  CHAIRMAN.  That  matter  will  come  up  to-morrow. 

Mr.  KENNEY.  I  suggest  that  this  matter  be  thoroughly  thrashed 
out  in  this  conference.  I  represent  the  city  of  Holyoke,  Mass., 
which  has  probably  the  largest  municipal  lighting  plant  in  the  East. 
I  will  illustrate  the  difficulty  of  getting  information.  Our  city  peti- 
tioned the  gas  and  electric  light  board  of  Massachusetts  for  a  reduc- 
tion in  the  requirements  to  meet  depreciation.  A  new  law  was  car- 
ried through  the  legislature  last  year  which  makes  our  departments 
show,  not  a  book  account  but  a  cash  account.  Depreciation  may 
differ  in  different  plants.  The  commissioners  determine.  It  is 
fixed  at  5  per  cent,  but  if  required,  it  may  be  more.  We  bought  this 
plant  for  $720,000  and  we  got  a  dilapidated  concern.  Under  the 
laws  of  Massachusetts,  if  a  municipality  desires  to  enter  upon  munic- 
ipal lighting,  it  must  vote  first  on  that  proposition.  Having  voted 
to  do  so,  it  can  not  enter  into  possession  of  that  plant  at  once.  If 
you  are  going  to  acquire  a  water  plant  in  that  state,  you  might  enter 
into  possession  of  that  plant,  and  you  might  operate  it;  but  the  gas 
plant  remains  in  the  custody  of  the  original  owner  until  you  and  that 
original  owner  have  agreed  upon  a  price.  The  Holyoke  Water  Power 
Company  owned  our  plant,  and  they  asked  us  a  million  dollars  for  it. 
We  refused  to  pay  a  million  dollars,  and  the  superior  court  appointed 
three  commissioners  to  determine  its  value.  It  took  the  three  com- 
missioners and  several  very  able  members  of  the  council — experts  on 
both  sides — five  years  to  find  out  what  that  plant  was  worth.  Nat- 
urally the  Holyoke  Water  Power  Company  put  no  money  into  the 
plant  during  the  five  years,  beyond  what  was  absolutely  necessary. 


UNIFORM    MUNICIPAL    ACCOUNTING.  63 

At  the  end  of  the  five  years  it  cost  us  $110,000  to  put  it  in  order,  and 
the  commissioners  declared  it  was  worth  $725,000.  The  law  does 
not  give  the  company  anything  for  a  franchise.  The  commissioners 
are  all  able  attorneys,  and  they  discovered  that  there  was  something 
which  looked  to  the  average  layman  like  a  way  of  getting  around  the 
franchise.  They  said  you  could  not  get  anything  for  a  franchise, 
but  the  Holyoke  Water  Power  Company  created  a  market,  and  you 
must  pay  for  the  market.  We  have  since  that  time  put  almost 
$300,000  into  that  plant,  so  it  stands  us  to-day  at  $960,000  of  actual 
cash  spent.  We  have  issued  bonds  to  pay  for  it.  Some  run  thirty 
years,  some  ten  years,  and  some  fifteen  years.  We  have  reduced 
the  price  of  gas;  w^e  have  given  a  better  quality  of  gas;  and  we  have 
made  money  besides.  When  this  new  law  went  into  effect  we 
asked  the  commissioners  if  they  would  reduce  the  depreciation 
account.  It  was  put  at  $55,000,  which  was  to  be  set  aside  as  a  fund 
for  the  purpose  of  making  additions.  We  were  allowed  absolutely 
nothing  for  anything  put  into  the  plant  since  we  acquired  it.  At 
the  first  informal  meeting  in  the  statehouse  in  Boston,  in  discussing 
the  matter  one  of  the  commissioners  declared  that  it  would  be  an 
outrage  to  ask  the  city  of  Holyoke  to  set  aside  5  per  cent  each  year. 
Furthermore,  he  said  it  was  entitled  to  consideration  for  what  it  had 
put  in,  and  that  money  would  tide  us  over  for  five  years.  A  formal 
meeting  was  held  in  Holyoke  and  we  presented  our  case.  Shortly 
after  that  a  decision  was  rendered  and  here  is  the  point  I  want  to 
make:  There  is  a  difference  between  the  report  made  by  the  Census 
Bureau  and  the  report  made  by  our  state  department,  as  to  the 
value  and  the  cost  of  our  municipal  lighting  plant.  According  to 
the  Census  we  are  allowed  things  which  the  state  department  of 
Massachusetts  will  not  allow.  This  is  a  big  question  to  us  and  I  trust 
that  it  will  be  thoroughly  discussed,  and  that  I  may  carry  home  some 
light  that  will  help  us  when  we  come  to  the  state  legislature. 

The  CHAIRMAN.  Is  there  anything  further?  Will  Mr.  Chase, 
chairman  of  the  committee  of  ten  on  arrangements,  read  again  the 
names  of  the  committee  before  we  adjourn? 

(Mr.  Chase  reads  the  list.     See  page  44.) 

After  a  short  discussion  as  to  the  time  for  holding  the  next  session , 
the  conference  adjourned  until  9  o'clock  Wednesday  morning. 

THIRD  SESSION,  WEDNESDAY  MORNING,  FEBRUARY  14. 

The  conference  was  called  to  order  at  9.30  a.  m.,  by  the  chairman. 

The  CHAIRMAN.  The  meeting  will  come  to  order.     Yesterday  a 
committee  was  appointed  on  programme,  to  consider  the  subject  of 
procedure  for  to-day.     Mr.  Chase  is  chairman  and  will  report. 
27311—06 5 


64  UNIFORM    MUNICIPAL    ACCOUNTING. 

Mr.  CHASE.  The  committee  upon  resolutions  and  procedure,  hav- 
ing requested  Mr.  Powers  to  assist  it,  and  having  carefully  considered 
the  primary  reasons  for  the  calling  of  the  conference  by  the  Census 
Bureau,  advise  that  the  following  procedure  be  adopted: 

(1)  That  consideration  of  items  4  and  5  of  the  preliminary  programme  be  postponed 
until  the  evening  session  of  Wednesday,  which  shall  be  devoted  to  their  discussion. 

(2)  That  item  6,  "  Consideration  of  books  of  account  and  methods  of  reports  for  cities," 
be  taken  up  immediately  and  made  the  business  of  the  morning  session. 

(3)  That  during  discussion  no  member's  remarks  shall  continue  longer  than  five  minutes, 
and  that  the  chairman  of  the  conference  is  respectfully  requested  to  promptly  notify  a 
speaker  whenever  this  limit  of  time  is  reached.     This  limit  is  set  in  order  that  we  may  com- 
plete the  programme  in  the  time  available. 

(4)  That  item  7,  "Municipal  industries  and  public  service  corporations,"  be  considered 
at  the  afternoon  session  at  2  o'clock,  and  the  discussion  of  this  subject  be  closed  at  3.30 
o'clock,  when  item  8,  "  Consideration  of  the  glossary  of  terms,"  shall  be  taken  up.     Limits 
to  discussion  as  before. 

(5)  The  evening  session  shall  be  devoted  to  discussion  of  "balance  sheets"  and  "revenue 
and  expense  accounts"  under  the  same  limit  of  discussion.     During  the  afternoon  or  even- 
ing session  this  committee  will  report  a  formal  set  of  resolutions  to  be  acted  upon  by  the  con- 
ference.    Those  resolutions  shall  embody  the  views  of  the  committee  and  of  the  members 
of  the  conference  in  relation  to  the  primary  objects  of  the  meeting.     Those  resolutions 
shall  be  so  drawn  that  they  may  be  utilized  by  the  city  officials  attending  the  conference  as 
the  basis  of  reports  to  their  respective  city  governments,  and  shall  briefly  set  forth  the  con- 
clusions of  the  conference  in  regard  to  the  practical  application  of  the  distribution  of  accounts 
and  titles  of  the  Census  schedules  to  the  annual  reports  of  all  cities.     Those  resolutions  shall 
urge  upon  city  councils  the  importance  of  authorizing  the  financial  officers  of  each  city  to 
rearrange  their  annual  reports  according  to  the  "uniform"  distribution  of  the  Census  as 
promptly  as  may  be  practicable. 

For  the  committee : 

HARVEY  S.  CHASE,  CJiairman. 

HARRY  B.  HENDERSON,  Secretary. 
WASHINGTON,  D.  C.,  February  14,  1906. 

Mr.  HENDEKSON.  I  move  adoption  of  the  resolution. 

Mr.  CHASE.  I  second  the  motion. 

The  CHAIRMAN.  You  have  heard  the  motion  seconded.  Is  there 
any  discussion  ?  If  not,  I  would  suggest  that  if  there  are  any  persons 
who  object  to  the  five-minute  rule,  now  is  their  time  to  talk. 

Of  course  the  rule  will  not  apply  to  anyone  having  a  paper  that  is 
up  for  discussion.  Are  there  any  comments  ?  If  not,  I  will  put  the 
motion.  All  those  in  favor  of  the  adoption  of  the  report  as  sub- 
mitted by  the  committee  will  signify  it  by  saying  "Aye;"  contrary, 
"No."  The  motion  is  carried. 

Now,  Mr.  Chase,  if  you  will  give  me  the  order  of  procedure,  I  wish 
to  make  a  general  statement.  A  number  of  the  gentlemen,  city 
officials  and  others,  have  spoken  to  me  in  a  confidential  way  with 
reference  to  the  instructions  of  the  Census  Bureau,  and  the  desire 
for  something  that  will  be  of  a  little  more  value  to  them  in  the  work 
of  a  uniform  classification  of  accounts — that  will  bring  their  reports 


UNIFORM    MUNICIPAL   ACCOUNTING.  65 

into  harmony  with  those  of  others.  They  confess,  what  anyone 
familiar  with  the  subject,  in  the  Census  Bureau  or  elsewhere,  knows 
to  be  true,  that  there  is  some  difficulty  in  complying  with  the  instruc- 
tions of  the  Census  Bureau.  The  reason  is  that  we  frame  our  instruc- 
tions with  a  view  to  covering  the  institutions  of  forty  states  and  also 
of  the  territories,  while  anyone  who  is  working  in  a  city  has  to  do  but 
one,  and  thus  there  is  much  material  which  we  have  to  give  our  Census 
clerks  which  is  of  absolutely  no  use.  I  know  it  must  be  something  of 
a  perplexity  and  not  a  guide,  but  I  will  explain  what  I  stated  in  part 
yesterday.  In  the  first  place,  we  were  forced  to  make  this  study 
of  our  rules  and  our  instructions  for  all.  We  have  mastered  the 
larger  amount  of  these  questions  for  individual  cities  and  states,  and 
we  expect  that  this  conference  will  throw  some  little  light  along 
this  line.  For  1905  we  expect  to  prepare  new  instructions  and  a 
new  schedule.  The  schedule  will  be  simplified  some  little,  but  it 
must  go  along  the  lines  of  uniformity.  The  scheme  that  we  are 
working  on  is  to  give  a  little  book  of  instructions,  not  to  exceed  one- 
fourth  and  possibly  not  to  exceed  one-sixth  of  the  present  one  in  size, 
all  expressed  in  simple,  general  terms.  We  expect  to  do  this,  and  in 
addition  thereto  we  expect,  for  the  benefit  of  our  clerks,  to  give  a 
supplemental  typewritten  sheet  dealing  with  the  laws  of  a  particular 
state.  We  confess  we  could  not  see  our  way  out  at  the  beginning, 
but  we  shall  have  it  prepared  in  such  a  way  that  our  instructions  will 
serve  as  a  simple  guide  to  assist  the  city  official  in  every  way.  We 
feel  that  there  will  be  light,  not  only  on  the  Census  work,  but  on  the 
whole  movement.  I  mention  this  because  I  find  that  there  are  quite 
a  number  among  those  present  who  are  wishing  and  saying  that  there 
might  be  a  little  more  simplicity.  They  seem  to  see  the  desirability 
for  the  reform,  but  they  do  not  have  the  simple  manual  to  help  them 
in  all  things. 

Mr.  TRACY.  Mr.  Chairman  and  gentlemen,  the  bureau  of  inspection 
and  supervision  of  public  offices  of  Ohio  has  been  engaged  since  the 
previous  meeting  called  by  the  United  States  Census  Bureau  in 
November,  1903,  in  perfecting  the  system  of  accounting  in  the  various 
county  offices  of  the  state  and  in  prosecuting  investigations  of  county 
affairs,  particularly  as  to  the  compensation  by  fees  of  county  officials. 
The  aggregate  amount  of  the  findings  in  such  investigations  approxi- 
mates $600,000.  The  labor  of  applying  the  indefinite  fee  laws  to 
the  varied  conditions  existing  in  such  offices  proved  even  more  diffi- 
cult than  that  of  formulating  and  installing  uniform  municipal 
accounts  and  reports.  Now,  that  the  inspection  of  the  eighty-eight 
counties  of  the  state  has  been  concluded,  our  attention  will  be 
directed  during  the  next  few  months  to  the  introduction  of  depart- 
mental and  general  ledger  accounts  in  the  city  offices. 


66  UNIFORM    MUNICIPAL    ACCOUNTING. 

The  first  work  of  the  department  upon  its  organization  in  1903  was 
the  formulation  of  schedules  for  uniform  municipal  reporting.  To 
enable  the  auditing  departments  of  the  seventy-one  cities  of  the  state 
to  render  promptly,  and  with  as  little  additional  labor  as  possible, 
accurate  and  trustworthy  information  in  the  detail  desired  for  our 
use  in  compiling  the  comparative  statistics  required  under  the  Ohio 
uniform  accounting  law,  it  was  found  necessary  to  install  a  system  of 
accounting  that  would  record  the  classifications  of  the  schedules  from 
day  to  day,  and  not  defer  their  compilation  until  the  close  of  the  fiscal 
year,  as  was  the  common  practice  in  most  city  auditing  departments 
throughout  the  state.  The  principal  feature  of  the  system  pre- 
scribed by  the  Bureau,  for  the  purpose  of  securing  information  for  the 
revenue  and  expense  schedules,  is  that  the  classification  is  to  be  deter- 
mined and  the  proper  entry  made  in  the  appropriation  account  (the 
classification  of  which  account  exactly  corresponds  with  the  classi- 
fication of  the  schedules)  at  the  time  the  city  auditor  issues  his 
warrant  upon  the  city  treasury. 

If  the  auditor  is  in  doubt  as  to  which  account  is  affected  by  the 
claim  presented  for  payment,  or  as  to  the  proper  classification,  he 
confers  immediately  with  the  departmental  officer  authorizing  the 
expenditure  while  the  facts  are  still  fresh  in  the  minds  of  all  parties 
concerned  in  the  transaction.  This  facilitates  reaching  a  proper 
conclusion  and  consistent  treatment  of  the  numerous  matters  of 
detail  arising  in  the  keeping  of  municipal  accounts.  The  city  auditor 
who  has  faithfully  and  accurately  followed  the  system  of  accounting 
prescribed,  will  be  able  at  the  close  of  the  fiscal  year  to  render  the 
report  as  to  revenue  and  expense  by  merely  entering  the  columnar 
totals  of  his  accounts  under  the  proper  heads  of  our  schedule  of  final 
detail,  from  which  it  is  readily  carried  forward  to  the  condensed 
schedules,  and  thus  our  department  will  have  the  necessary  infor- 
mation from  which  to  compile  the  comparative  statistics  within  ten 
days  after  the  close  of  the  fiscal  year. 

But  it  is  not  so  with  the  B  schedules,  designed  for  the  purpose  of 
giving  to  the  public  some  conception  of  the  assets  and  liabilities  of 
the  corporation.  At  the  time  of  the  organization  of  our  department 
not  a  single  city  in  the  state  had  in  use  a  general  ledger  of  any 
description  whatsoever,  nor  were  there  any  accounts  kept  that  would 
disclose  the  revenues  due  to  the  municipality  or  the  liabilities  against 
it.  The  special  assessment  accounts  in  most  of  the  cities  were  in 
a  very  chaotic  condition.  Such  assessments  were  collected  in  part 
by  various  city  officials  and  employees  and  in  part  in  the  office  of 
the  county  treasurer.  The  latter  collections  were  reported  to  the 
city  officials  by  the  county  auditor  semiannually  and  in  one  lump 
sum,  without  informing  the  city  officials  of  the  several  amounts 
legally  due  on  each  separate  special  assessment  fund,  as  is  required 


UNIFORM    MUNICIPAL   ACCOUNTING.  67 

by  law.  In  consequence  of  this  negligent  manner  of  making  collec- 
tions and  the  readiness  of  the  city  council  to  make  rebates  of  assess- 
ments, at  frequent  intervals  it  becomes  necessary  to  issue  refunding 
bonds  to  redeem  the  special  assessment  bonds  due,  said  refunding 
bonds  to  be  cared  for  out  of  the  general  sinking  fund  of  the  city. 
Again,  at  stated  periods,  a  bond  issue  would  be  necessary  to  redeem 
temporary  loans,  made  wholly  without  authority  of  law  for  the  pur- 
pose of  paying  the  obligations  of  the  city  for  running  expense.  The 
department,  acting  within  its  supervisory  authority,  has  met  with 
hearty  cooperation  of  the  city  officials,  and  for  the  fiscal  year  1905 
it  will  be  shown  by  our  schedules  that  every  city  of  the  state  has 
confined  its  expenditures  for  operation  and  maintenance  to  the  legit- 
imate revenues  of  the  current  year. 

Mr.  CHAPMAN.  I  think  I  can  follow  up  Mr.  Tracy  with  a  paper 
which  I  have  prepared,  but  I  would  like  to  speak  somewhat  on  what 
we  call  Schedule  A  and  Schedule  B.  The  first  division  of  this  sub- 
ject, that  relating  to  the  A  schedule,  is  a  matter  that  I  think  can  be 
discussed  in  a  way  at  this  session  before  we  adjourn.  I  have  pre- 
pared a  few  remarks  on  the  subject  of  some  definitions  of  municipal 
accounts  which  are  in  line  with  the  present  article.  The  B  schedule 
treats  of  assets  and  liabilities,  whether  they  are  regarded  as  a  bal- 
ance sheet  or  not.  The  second  step  is  one  which  was  discussed  at 
the  previous  conference,  and  concerning  which  there  are  many  vital 
points,  which  I  think  will  be  hardly  more  than  touched  upon  in  the 
remaining  time  of  this  session. 

The  CHAIRMAN.  The  question  suggested  by  the  secretary  is  whether 
this  refers  directly  to  these  schedules  of  Ohio,  or  whether  it  had  better 
come  at  a  later  time  in  connection  with  the  balance  sheet  proper. 

Mr.  CHAPMAN.  It  is  rather  foreign  to  the  balance  sheet.  It  has 
actually  nothing  to  do  with  those  assets  or  liabilities,  but  relates 
entirely  to  the  governing  definitions  which  should  control  the  classi- 
fication and  reporting  of  those  accounts  which  relate  to  the  revenue 
and  expenses  of  the  city,  so  that  it  is  in  direct  line  with  the  matter 
which  has  been  offered.  It  is  a  comparison  or  the  exposition  of  cer- 
tain principles. 

The  CHAIRMAN.  That  is  all  right.  I  will  accept  it.  I  have 
accepted  this  paper  of  Mr.  Chapman's,  which  is  a  very  interesting 
one  and  one  that  has  attracted  the  attention  of  many,  as  Item  No.  2. 

(Mr.  Chapman's  paper  follows.) 

GOVERNING  DISTINCTIONS  IN  MUNICIPAL  ACCOUNTS,  WITH  SPECIAL  REFERENCE  TO  THEIR 
CLASSIFICATION  AS  REFLECTED  ON  THE  BOOKS  OF  THE  COMPTROLLER  OF  THE  CITY  OF 
NEW  YORK. 

The  first  idea  which  instinctively  dominates  the  act  of  classifying  accounts  is  the  recog- 
nition of  opposites  with  respect  to  a  governing  consideration,  and  the  first  distinction  to 
be  apprehended  is  accordingly  dual,  or  as  between  the  two  extremes  of  a  significant  point 
of  view. 


68  UNIFORM    MUNICIPAL   ACCOUNTING. 

After  thus  establishing  a  primary  differentiation  each  of  the  factors  is  in  turn  subdivided 
into  its  primary  components,  constituting  a  secondary  differentiation,  and  so  on  by  suc- 
ceeding developments,  retaining,  however,  the  duplex  scheme  of  analysis  so  far  as  the 
principle  advantageously  obtains,  before  breaking  up  into  the  final  and  multiplex  analysis 
which  marks  the  point  at  which  diametric  distinctions  disappear  and  the  individuality 
of  each  account  or  minor  group  constitutes  it  a  class  by  itself. 

In  the  annual  report  of  the  comptroller  of  the  city  of  New  York  the  first  broad  distinc- 
tion to  be  observed  is  reflected  in  Table  n  (page  2),  showing  separately  the  total  volume  of 
transactions  of  the  sinking  fund  and  of  the  city  treasury,  respectively,  the  sinking  fund 
being  restricted  to  the  specific  purpose  of  redeeming  the  city  debt  by  sucji  provision,  while 
the  city  treasury  is  applicable  to  all  other  purposes,  including  redemption  by  direct  taxation 
or  through  reimbursements  by  local  assessments.  This  distinction  both  of  title  and  pur- 
pose is  emphasized  in  the  city's  procedure  and  on  the  comptroller's  books  by  the  separate 
organization  and  administration  of  each  of  said  grand  divisions  of  the  city  exchequer. 

Following  in  Tables  in  and  iv  (pages  3  and  4)  the  transactions  of  the  sinking  fund  are 
again  divided  with  respect,  first,  to  receipts  and  payments  and,  second,  to  investments 
acquired  and  disposed  of,  and  coincidently  the  action  of  both  the  cash  and  securities  is 
analyzed  and  expressed  according  to  the  several  elements  and  operations  involved. 

Coming  now  to  the  city  treasury,  Table  v  (page  5),  which  bears  more  directly  on  our  sub- 
ject, it  will  be  seen  that  a  primary  distinction  again  claims  first  consideration,  namely, 
as  between  (a)  transactions  predicated  upon  taxes  and  appropriations,  and  (6)  transac- 
tions not  so  predicated.  To  be  more  specific,  the  first  (a)  relates  to  the  moneys  expended 
from  the  several  appropriations  made  in  the  annual  budget  in  accordance  with  which  the 
annual  tax  levy  is  determined,  and  the  second  (6)  relates  to  expenditures  out  of  funds 
provided  by  issue  of  bonds,  levies  of  local  assessments,  water  rents,  or  from  receipts  of  the 
numerous  and  varied  revenues  of  the  city  not  pledged  to  the  sinking  fund.  The  funds 
raised  by  annual  tax  are  in  the  main  provided  to  meet  the  general  running  expenses  of  the 
city  government,  including  state  tax,  current  interest,  and  redemption  of  debt,  either 
directly  or  by  sinking  fund  installments  accrued;  while  the  funds  raised  by  bonds,  assess- 
ments, water  rents,  and  miscellaneous  revenues  are  in  the  main  provided  or  used  to  meet 
the  outlay  incident  to  public  works,  improvements,  maintenance,  and  such  operations  as 
are  financed  by  related  revenues  or  emergency  expenses  ordered  by  law  or  resolution. 

This  distinction  permeates  every  part  of  the  city's  accounts,  and  two  kinds  of  warrants 
are  registered  for  payment  out  of  the  city  treasury,  namely,  "A"  warrants,  chargeable 
against  "appropriation  accounts"  or  budget  credits,  and  "B"  warrants,  chargeable  against 
"special  and  trust  accounts,"  which  latter  title  covers  all  city  treasury  accounts  (other 
than  appropriation)  against  which  warrants  are  charged  or  to  which  any  revenues  or 
receipts,  other  than  what  relate  to  appropriation,  are  credited. 

Of  the  expenditures  made  by  "A"  warrants,  the  state  tax  and  the  interest  on  and  redemp- 
tion of  the  city  debt,  because  of  their  radical  character,  are  expressed  separately,  while  all 
other  expenses,  classified  on  the  schedules  of  appropriation  accounts  under  the  titles  of 
departments  and  bureaus,  and  the  subtitles  of  divisions  and  purposes,  are  broadly  regarded 
under  the  comprehensive  designation  of  "expenses  of  the  city  government." 

Of  the  expenditures  made  by  "B  "  warrants,  the  refunds  of  imposts  and  fees  and  payments 
on  account  of  the  interest  and  principal  of  the  city  debt  are,  for  the  reason  just  stated, 
given  separate  expression;  while  all  other  expenditure  covering  construction,  maintenance, 
operation,  administration  of  trust  funds,  and  every  conceivable  purpose,  indicated  under 
the  elaborate  classification  of  "  special  and  trust  accounts,"  is  broadly  regarded  under 
the  comprehensive  designation  of  "outlay  for  public  undertakings." 

All  transfers  of  credit  between  "appropriation  accounts"  or  between  "special  and  trust 
accounts,"  or  from  accounts  of  the  one  kind  to  accounts  of  the  other,  are  segregated  from 
the  aggregate  charges  and  credits  and  stated  apart  from  the  income  and  outgo  per  se. 

The  method  of  handling  the  appropriation  accounts  is  essentially  simple.  One  control- 
ling account  in  the  general  ledger  registers  the  aggregate  action  of  the  multitude  of  specific 


UNIFORM    MUNICIPAL   ACCOUNTING.  69 


appropriation  accounts  which  form  the  classified  contents  of  the  appropriation  ledger, 
each  succeeding  calendar  year  giving  rise  to  both  a  controlling  account  and  ledger  dealing 
exclusively  with  said  year's  appropriations,  and  the  classification  adopted  follows  the  order 
of  the  annual  budget,  which  in  turn  derives  its  form  and  specifications  from  the  depart- 
mental estimates  upon  which  the  board  of  estimate  and  apportionment  bases  the  sums 
allowed. 

The  method  of  handling  the  special  and  trust  accounts  is,  alternatively,  extremely  com- 
plicated, and,  with  the  exception  of  three  controlling  accounts  (operated  in  the  general 
ledger  to  treat  collectively  the  numerous  specific  accounts  peculiar  to  the  respective  boroughs 
of  Brooklyn,  Queens,  and  Richmond,  as  they  severally  were  constituted  prior  to  consolida- 
tion, and  which  specific  accounts  in  liquidation  form  the  contents  of  borough  ledgers),  all 
other  special  and  trust  accounts  are  each  and  all  a  separate  general  ledger  account,  and  the 
variety  of  subjects  therein  registered,  both  with  respect  to  character  of  receipts  and  object 
of  payments,  and  articulation  of  accounts  related,  are  so  multifarious  that  prior  to  the 
adoption  of  the  present  plan  of  stating  the  annual  report  no  comprehensive  scheme  of  classi- 
fying these  accounts  was  attempted. 

The  classification  of  "special  and  trust  accounts,"  undertaken  for  the  first  time  in  the 
annual  report  for  the  year  1902,  repeated  in  the  report  for  1903,  here  before  us,  and  now  in 
course  of  preparation  for  the  year  1904,  forms  the  subject  of  "statement  8,"  the  preceding 
summary  of  which  appears  on  page  47,  and  the  foregoing  remarks  have  been  merely  pre- 
liminary to  the  primary  purpose  of  this  paper,  which  is  to  elucidate  the  substance,  form,  and 
purpose  of  said  statement  8. 

The  structure  of  this  statement  is  based  upon  the  expedient  of  employing,  simultaneously, 
both  the  process  of  analysis  and  of  synthesis,  and  while  the  accounts  are  each  and  all  reduced 
to  their  common  or  fundamental  elements,  by  the  division  and  distribution  of  controlling 
totals  among  a  series  of  analytical  columns,  affording  proof  of  accuracy  by  the  equation  of 
accounting  opposites,  the  accounts  are  also  classified  according  to  the  similarity  of  their 
individual  character  and  purpose  by  the  order  in  which  they  are  written,  grouping  them 
first  according  to  their  more  specific  nature  or  narrowest  classification,  and  bringing  kindred 
groups  together  to  express  the  more  general  or  broad  classification  reflected  in  the  grand 
summary.  By  this  means  the  two  processes  react,  one  upon  the  other;  the  elements  and 
the  extent  thereof,  which  are  chiefly  involved  in  each  class  of  accounts,  as  well  as  the  classes 
which  contribute  and  the  volume  of  their  contribution  to  the  activity  of  each  element,  are 
shown  severally  and  collectively.  For  instance,  the  element  "  assessments  "  is  seen  to  relate 
in  the  main  to  the  broad  classification  "construction,"  and  in  a  further  analysis  principally 
to  construction  of  streets  and  sewers.  The  element  "water  rents  "  relates  solely  to  the  class 
"operation,"  the  element  "receipts  subject  to  refund"  to  the  class  "trust funds,"  while  the 
element  "bonds  issued"  plays  into  every  class  of  accounts  operated. 

The  statement  is  here  presented  in  two  parts:  Part  I,  Receipts  and  ledger  accounts,  and 
Part  II,  Payments  and  warrants.  Each  part  displays  the  same  schedules  of  classified 
accounts,  but  differs  in  the  two  analyses  of  elementary  facts  peculiar  to  itself,  which, 
although  related,  nevertheless  exhibits  separate  and  distinct  equations. 

Passing  over,  for  the  time  being,  the  synthetic  feature  of  the  statement  governing  the  order 
and  classification  of  the  accounts  under  their  ledger  titles,  which  is  largely  a  matter  of 
selection  and  expression,  and  considering  first  the  analytical  feature  comprehended  by  the 
captions  and  equations  of  the  columns  distinguishing  the  several  fundamental  elements,  we 
will  observe  that  there  is  practically  no  latitude  in  determining  what  shall  be  considered  as 
fundamental  elements;  but,  on  the  contrary,  they  constitute  distinctions  which  we  are  bound 
to  recognize  if  we  would  truthfully  report  the  facts.  In  the  first  place,  the  transfers  of 
credit,  whether  received  into  or  paid  from  the  accounts  in  question,  are  purely  inter  se 
transactions,  and  accordingly  constitute  the  only  like  element  in  the  first  equation  of  both 
parts  of  the  statement  under  the  main  caption  "transfers  by  warrant"  and  subcaption  of 
"appropriation  accounts,"  "special  and  trust  accounts,"  and  "sinking  funds,"  severally 
indicating  from  or  to  which  kind  of  accounts  the  stated  credits  were  derived  or  applied, 
respectively. 


70  UNIFORM    MUNICIPAL   ACCOUNTING. 

Apart  from  the  inter  se  transactions,  the  characteristic  elements  of  the  receipts  and  pay- 
ments are  found  to  consist  of  the  following: 

Part  I.  Receipts  comprehending  collections  of  (a)  assessments,  (6)  water  rents,  (c)  items 
subject  to  refund,  (d)  par  value  of  bonds  issued,  and  (/)  miscellaneous  revenue,  the  latter 
comprising  the  innumerable  details  of  licenses,  rents,  fines,  fees,  penalties,  permits,  sales, 
interest,  and  what  not,  fully  analyzed  in  "  statement  5,"  but  which  it  is  impracticable  to 
regard  individually  in  any  general  statement  without  at  once  destroying  its  broader 
significance. 

Part  II.  Payments,  comprehending  (a)  refunds  of  taxes,  assessments,  water  rents,  excise, 
bail,  interest,  etc. — in  short,  all  money  paid  back  to  the  parties  from  whom  it  was  originally 
received;  (6)  redemption  of  the  city  debt;  (c)  interest  on  the  city  debt;  and  (d)  all  other 
outlay,  which  is  designated,  as  hereinbefore  stated,  by  the  broad  term  "outlay  for  public 
undertakings." 

The  secondary  equations  or  series  of  analytical  columns  treat,  respectively,  in  Part  I, 
with  the  charges,  credits,  and  balances  of  the  ledger  accounts,  and  in  Part  II  with  the  war- 
rants drawn,  canceled,  paid,  and  outstanding,  the  debit  and  credit  elements  cross  casting  to 
a  center  or  balancing  total.  The  ledger  summary  (Part  I)  establishes  the  debit  and  credit 
balances  at  the  beginning  and  end  of  the  year  under  review,  the  interim  charges  divided  as 
between  warrants  registered  and  general  items,  and  the  interim  credits  divided  as  between 
cash  receipts  and  general  items,  the  latter  including  also  warrants  canceled  as  void  after 
registration.  It  is  here  to  be  noted  that  the  cash  receipts,  forming  an  item  on  the  credit  side 
of  the  ledger  summary,  or  second  equation,  are  the  same  as  in  the  total  or  controlling 
column  of  the  analysis  of  receipts,  forming  the  first  equation  of  the  same  part. 

The  summary  of  warrants  (Part  II)  establishes  the  warrants  outstanding  or  unpaid  at  the 
beginning  and  end  of  the  year  under  review,  the  warrants  drawn  during  the  year,  the  war- 
rants canceled,  and  the  warrants  paid  by  the  city  chamberlain  during  the  year.  In  this 
instance  it  is  to  be  noted  that  the  warrants  paid  and  forming  an  item  on  the  credit  side  of 
the  warrant  action,  or  second  equation,  correspond  in  amount  to  the  total  or  controlling 
column  of  the  analysis  of  payments,  forming  the  first  equation  of  the  same  part;  while  the 
warrants  registered  as  stated  in  the  ledger  summary  (Part  I)  are  the  same  in  amount  as  the 
warrants  drawn  as  stated  in  the  summary  of  warrants  (Part  II). 

Returning  now  to  the  classification  of  the  special  and  trust  accounts,  they  are  finally 
reduced  to  seven  general  heads,  namely,  (1)  construction,  (2)  equipment,  (3)  main- 
tenance and  repairs,  (4)  operation,  (5)  trust  accounts,  (6)  claims  and  judgments,  and  (7) 
miscellaneous. 

All  excepting  the  first,  i.  e.,  construction,  represent  schedules  of  ledger  accounts,  whereas 
construction  is  reached  in  the  procedure  by  summarizing  preceding  summaries  reflecting 
two  prior  developments,  and  retracing  our  process  we  find  that  schedule  1  (construction) 
is  the  combination  of  seven  construction  schedules,  J  to  P,  viz,  of  (J)  buildings,  (K)  bridges, 
(L)  streets,  (M)  sewers,  (N)  waterworks,  (O)  parks,  and  (P)  sundries.  Of  these  again,  all 
but  the  first,  i.  e.,  buildings,  are  schedules  of  ledger  accounts  not  further  classified;  whereas 
Schedule  J,  construction  of  buildings,  consists  of  15  .groups  of  accounts  showing  separately 
and  respectively  the  construction  of  (1)  schools,  (2)  museums,  (3)  libraries,  (4)  monuments 
(5)  baths,  (6)  hospitals,  (7)  charity,  (8)  correction,  (9)  markets,  (10)  armories,  (11)  fire 
engine  houses,  (12)  halls  and  courts,  (13)  police  stations,  (14)  docks,  (15)  rapid  transit 
(subway  stations  and  terminals). 

In  the  " construction  of  buildings"  is  included  the  acquisition  of  sites,  as  well  as  the  erec- 
tion of  buildings  thereon. 

In  "equipment"  are  included  fitting  up  and  furnishing  public  buildings,  fire  alarm  and 
telegraph  systems,  fire  engines  and  boats,  street  signs,  horses  and  trucks,  and  tools  for 
street  cleaning  and  other  departments,  indexing  records,  and  kindred  items. 

In  "maintenance  and  repairs"  are  included  painting,  repairing,  and  remodeling  public 
buildings  and  other  structures,  restoring  and  repaving  streets,  repairing  sewers  and  water 
pipes,  dredging,  and,  in  short,  all  outlay  looking  to  continued  efficiency  of  property  or  works 
already  possessed  or  in  use. 


UNIFORM    MUNICIPAL   ACCOUNTING.  71 

In  " operation"  are  included  the  expense  of  special  boards  and  commissions,  the  conduct 
of  waterworks,  and  various  extraordinary  outlays  by  the  departments  of  education,  health, 
fire,  police,  etc.,  either  financed  by  related  revenues  or  by  the  issue  of  revenue  bonds.  The 
revenue  bond  funds  for  increase  of  salaries,  for  support  of  night  schools,  for  expenses  of  con- 
ducting criminal  proceedings,  for  the  removal  of  snow  and  ice,  are  fair  samples  of  the  latter 
class. 

In  "trust  accounts"  are  included  such  items  as  police  pension  fund,  fire  department 
relief  fund,  public  school  teachers'  retirement  fund,  intestate  estates,  etc.,  all  being  funds 
held  and  administered  by  the  city  in  the  interest  of  associations  and  individuals  in  whom 
are  vested  the  titles  or  rights  to  said  moneys. 

Claims  and  judgments  require  little  explanation;  such  accounts  as  revenue  bond  fund  for 
claims,  Long  Island  City  judgments,  payment  of  claims  of  volunteer  firemen  of  Westchester 
county,  and  similar  accounts  arising  from  compromise  or  the  issue  of  legal  actions  against 
the  city,  are  classified  under  this  head. 

"Miscellaneous"  comprises  a  large  variety  of  accounts  which,  although  yielding  to  analy- 
sis, defy  more  specific  classification.  They  relate  principally  to  receipts  of  interest,  fees, 
and  other  miscellaneous  revenues,  receipts  subject  to  refund,  and  proceeds  of  bonds  issued 
in  anticipation  of  the  collection  of  taxes,  and  to  payments  of  refunds,  interest  and  principal 
of  the  city  debt,  and  other  exceptional  and  dissimilar  items  which  can  not  consistently  be 
classified  otherwise. 

Having  thus  established  controlling  figures  for  all  the  "special  and  trust  accounts"  col- 
lectively, it  becomes  merely  a  matter  of  introducing  the  remaining  general  ledger  accounts 
in  order  to  complete  the  circle  of  action  and  demonstrate  the  equilibrium  of  the  general 
ledger,  by  producing  a  trial  balance  as  at  the  beginning  and  as  at  the  end  of  the  calendar 
year. 

These  remaining  accounts  constitute  three  main  groups  comprising  Schedules  X,  Y,  and 
Z  (page  50),  termed,  respectively,  controlling  accounts,  fiduciary  accounts,  and  complemen- 
tary accounts,  which  are  appended  to  the  summary  of  ledger  accounts,  Part  I,  and  con- 
jointly therewith  produce  the  opening  and  closing  trial  balances  marked  (a)  (a),  and  (b)  (b), 
respectively. 

The  controlling  accounts,  Schedule  X,  thus  bring  into  the  equation  the  aggregate  action 
of  the  appropriation  ledger,  the  warrant  drawn  accounts  "A"  and  "B,"  the  receipts  and 
application  of  general  fund  revenues,  and  the  collections  of  general  tax. 

The  fiduciary  accounts,  Schedule  Y,  in  like  manner  introduce  the  cash  or  city  chamber- 
lain's accounts,  the  collector  of  assessments  and  arrears,  and  the  receiver  of  taxes;  and 
lastly,  the  complementary  accounts,  Schedule  Z  (although  comprising  related  groups  dis- 
playing equal  aggregate  debits  and  credits,  which  could  therefore  be  either  included  or 
excluded  from  the  equation  without  disturbing  the  balance  of  the  accounts),  complete  the 
full  exhibit  by  including  therein  the  aggregate  action  of  the  sinking  funds,  the  principal 
of  the  city  debt,  special -accounts  of  the  comptroller  and  chamberlain,  paymaster,  and 
collector  of  city  revenue,  with  related  accounts  operated  as  auxiliary  analysis  of  moneys 
in  escrow  or  in  transit  between  the  primary  accounts  wherein  the  transactions  ultimately 
rest, 

While  the  classification  of  the  complicated  aggregation  of  accounts  included  under  the 
term  "special  and  trust,"  numbering  several  thousand  distinct  ledger  accounts,  is  reflected 
only  in  this  statement  8,  the  analysis  thereof,  as  effected  by  the  columns  employed,  will 
be  found  to  correspond  with  the  significant  generalities  reflected  on  Table  v  (page  5)  dealing 
with  the  city  treasury,  whereon  against  the  title  "special  and  trust  accounts,"  on  the  pay- 
ment side,  direct  reference  is  made  to  statement  8,  and  on  the  receipt  side  reference  is  made 
to  separate  specific  statements,  which,  although  dealing  more  minutely  with  the  receipts, 
reflect  the  same  elements  as  those  developed  in  the  analysis  herein  described. 

While  the  principle  here  set  forth  recognizes  only  the  distinction  as  between  "A"  and  "B" 
warrants,  it  appears  that  one  special  and  trust  account,  entitled  "additional  water  fund," 
and  forming  one  of  the  water  construction  accounts,  by  reason  of  the  magnitude  of  the 


72  UNIFORM    MUNICIPAL   ACCOUNTING. 

payments  made  thereunder,  has  had  allotted  exclusively  thereto  a  separate  warrant  register 
and  a  separate  series  of  warrants,  which  are  known  as  "C"  warrants,  and  for  that  reason 
both  Table  v  and  statement  8  are  seen  to  read  "B"  and  "C"  warrants  instead  of  simply 
"B"  warrants.  This  is  merely  an  incident  of  detail,  and  in  no  way  need  confuse  the  prin- 
ciple here  laid  down,  which  is  that  the  distinction  as  between  the  sinking  funds  and  the 
city  treasury,  and  as  between  appropriation  accounts  and  special  and  trust  accounts  as 
hereinbefore  described,  and  as  between  analysis  according  to  elements  and  classification 
according  to  subjects,  is  of  too  vital  importance  in  accounting  and  reporting  municipal 
transactions  for  them  to  give  way  to  any  system  of  accounts  or  scheme  of  reports  that 
will  obliterate  their  significance  or  cause  them  to  disappear  from  the  expression  of  results. 

The  CHAIRMAN.  There  was  a  request  from  Comptroller  Betz,  of  St. 
Paul,  to  present  some  of  the  papers  of  St.  Paul  when  we  were  through 
with  the  discussion  of  the  Ohio  schedules ;  but  I  think  that  this  would 
be  an  opportune  time  for  Mr.  Betz  to  read  his  paper,  and  then  take 
up  the  discussion  of  the  Ohio  schedules  when  he  has  finished. 

Mr.  BETZ.  I  don't  want  to  trespass  upon  the  time  now  at  all.  I 
have  no  paper  prepared.  We  have  a  few  of  our  schedules  here,  but 
probably  it  will  be  of  more  interest  to  the  gentlemen  present  to  go 
on  with  the  discussion  of  the  Ohio  schedules,  although  I  should  be 
very  glad  to  talk  on  this  subject  if  it  is  desired. 

The  CHAIRMAN.  You  might  show  the  gentlemen  all  the  schedules 
with  reference  to  this. 

Mr.  BETZ.  As  long  as  it  is  your  pleasure,  I  will  give  a  brief  descrip- 
tion of  the  way  St.  Paul  is  governed  by  a  home  charter.  The  city 
of  St.  Paul  is  governed  by  what  we  term  "a  home-rule  charter." 
This  charter  was  adopted  by  the  votes  of  its  citizens  under  an  ena- 
bling act  passed  by  the  legislature  in  1899.  The  government  of  the 
city  under  this  charter  is  managed  by  various  boards,  such  as  police, 
fire,  park,  etc.  The  comptroller  is  the  head  of  the  financial  depart- 
ment and  all  expenditures  of  whatever  nature  must  pass  through 
this  department.  In  making  up  the  budget  of  the  city,  the  comp- 
troller makes  the  estimate  personally  and  lays  the  same  before  the 
conference  committee.  After  the  conference  committee  has  either 
adopted  his  figures  or  changed  them,  it  is  submitted  to  the  council 
and  there  finally  adopted.  After  deducting  from  this  budget  all 
receipts  from  other  sources  than  taxation,  the  balance  is  placed  in 
the  tax  levy.  In  the  annual  budget  the  various  funds  set  apart  for 
most  of  the  departments  are  limited  by  our  charter  to  so  many  dol- 
lars and  cents,  and  the  expenses  of  any  department  can  not  exceed 
that  limit.  The  common  council  does  not  have  the  power  to  transfer 
moneys  from  one  fund  to  another.  The  taxes  are  collected  by  our 
county  treasurer  and  by  him  turned  over  to  the  city.  The  taxes  in 
St.  Paul  are  collected  a  year  after  they  are  levied,  and  in  order  for 
the  city  to  be  upon  a  cash  basis  the  charter  permits  the  tax  levy  to 
be  anticipated  by  the  sale  of  interest  bearing  certificates  in  an  amount 
not  exceeding  80  per  cent  of  the  tax  levy.  When  these  certificates 


UNIFORM    MUNICIPAL   ACCOUNTING.  73 

are  sold,  each  department  is  credited  upon  the  books  of  the  comp- 
troller with  80  per  cent  of  the  budget  allowance.  But  no  moneys 
received  from  the  county  treasurer  in  any  one  year  can  be  used  for 
any  other  purpose  than  the  payments  of  these  tax  levy  certificates 
until  they  are  all  paid  up.  The  balance  that  comes  into  the  treas- 
ury, after  the  satisfaction  of  the  tax  levy  certificates,  is  apportioned 
to  the  various  department  funds. 

All  payments  made  by  our  city  are  made  by  city  orders.  These 
orders  are  made  up  by  the  city  clerk  from  claim  sheets  prepared  by 
the  city  comptroller.  These  claim  sheets  represent  audited  resolu- 
tions that  have  been  passed  by  the  common  council.  After  the  city 
clerk  has  prepared  and  signed  the  orders,  they  are  transmitted  to 
the  mayor  for  his  signature,  and  then  brought  to  the  comptroller, 
where  they  are  rechecked  by  the  claim  sheets  and  are  countersigned 
by  him.  This  order  is  then  given  out  to  the  payee,  who  takes  it  to 
the  city  treasurer,  and  the  city  treasurer  stamps  the  name  of  the 
bank  that  he  wishes  to  pay  this  order  and  signs  it.  In  this  way  we 
have  four  signatures  on  every  warrant  that  is  paid  out.  The  city 
comptroller  keeps  a  regular  set  of  double-entry  books — makes  a  trial 
balance  once  a  month — and  in  addition  makes  out  a  daily  balance 
sheet,  showing  in  the  first  column  the  amount  to  the  credit  of  each 
fund  on  the  previous  day;  in  the  next  column  the  amount  that  has 
been  paid  into  the  treasury  to  the  credit  of  such  fund;  in  the  third 
column  the  payments  that  have  been  made  on  account  of  such  fund ; 
in  the  fourth  column  the  credit  balance  left  to  that  fund;  and  in  the 
fifth  column  the  amount  of  warrants  that  have  been  charged  to  such 
fund  but  are  still  outstanding  and  not  paid.  This  balance  sheet  is 
transmitted  to  the  treasurer,  who  is  required  to  check  it  over,  report 
errors,  if  any,  and  if  found  correct,  he  must  sign  it  and  place  the  same 
on  file.  At  the  end  of  the  year  these  sheets  are  bound  into  one 
volume  and  form  part  of  the  permanent  records  of  the  office. 

There  are  a  great  many  other  things  which  I  should  like  to  discuss 
in  connection  with  the  system  adopted  by  the  city  of  St.  Paul,  and 
which  is  considered  one  of  the  best  in  the  country;  but  the  time  is 
too  short  to-day. 

Mr.  CHASE.  May  I  ask  a  question?  Is  that  really  a  trial  balance 
of  your  appropriation  account  ? 

Mr.  BETZ.  No;  it  is  a  statement  of  daily  balances. 

Mr.  CHASE.  Are  any  of  your  accounts  ever  overdrawn? 

Mr.  BETZ.  Only  in  a  few  instances. 

Mr.  CHASE.  I  would  like  to  call  Mr.  Betz's  attention  to  a  part  of 
the  discussion  regarding  the  terms  that  are  to  be  used  in  designating 
the  various  schedules  to  be  adopted. 

Mr.  BETZ.  Instead  of  a  balance  sheet,  this  might  be  termed  a 
statement  of  daily  balances. 


4  UNIFORM    MUNICIPAL    ACCOUNTING. 

Mr.  TRACY.  Under  the  law  of  our  state,  municipal  plants  operated 
by  a  city  are  managed  by  a  board  of  public  service,  which  has  the 
authority  to  fix  the  charges  for  services  rendered  to  private  con- 
sumers and  is  required  under  the  law  to  furnish  the  water  supply  for 
fire  department  purposes,  and  to  the  public  schools,  hospitals,  etc., 
free  of  charge.  The  rates  fixed  against  private  consumers  are 
extended  in  the  large  cities  but  not  in  the  small  cities,  but  the  law 
provides  that  if  the  charges  are  not  sufficient  to  meet  the  expenses 
of  operation,  the  council  shall  have  authority  to  appropriate  a  sum 
of  money  to  meet  this,  payable  from  the  general  property  tax.  You 
can  not  tax  the  consumer  of  water  for  the  general  purposes  of  the 
city.  Interest  charges  are  required  to  be  made  by  law  by  the  sink- 
ing fund  trustee  from  the  general  levy,  and  very  few  there  are;  but 
some  plants,  waterworks  plants,  and  a  very  few  electric  light  plants 
of  our  cities  have  been  able  to  set  aside  a  sum  of  money  from  their 
revenue  to  meet  the  interest  charges,  and  the  expense  therefor  is  met 
by  the  sinking  fund  trustee.  When  the  Census  Bureau  gets  out  the 
statistics  relating  to  the  operation  of  gas  and  electric  light  plants,  I 
am  wondering  how  they  will  treat  the  city  of  Columbus.  Our  plants 
pay  for  bonds,  interest  charges,  and  operating  expenses.  In  addi- 
tion to  that,  they  must  provide  a  5  per  cent  cash  fund,  which  is 
deposited  in  the  city  treasury  and  which  can  only  be  used  for  the 
maintenance  of  the  plant.  Now  we  run  up  against  it  in  Ohio — the 
electric  light  plant.  We  know  we  are  losing  money.  How  are  we 
to  treat  this  statistical  report,  as  compared  with  Columbus,  which 
does  not  pay  its  interest?  It  does  not  pretend  to  meet  its  bonds, 
and  yet  is  furnishing  water  and  gas  at  a  figure  which  apparently 
insures  a  loss. 

The  CHAIRMAN.  I  think  we  have  just  time  to  reach  the  White 
House  at  the  appointed  time. 

Mr.  MAC!NNES.  Then  I  move  we  adjourn. 

(Adjournment  taken  until  2  p.  m.) 

FOURTH  SESSION,  WEDNESDAY  AFTERNOON,  FEBRUARY  14. 

The  conference  was  called  to  order  at  2.15  p.  m.  by  the  chairman. 

The  CHAIRMAN.  The  gentlemen  will  please  come  forward  and  be 
seated.  That  we  may  thoroughly  understand  the  programme  for  the 
afternoon  I  will  ask  the  secretary  to  read  it. 

(The  programme  was  read  by  Doctor  Hartwell.) 

The  CHAIRMAN.  Discussion  of  the  genera]  subject  will  be  opened 
by  Mr.  Baker,  of  the  Engineering  News. 

Mr.  BAKER.  Mr.  Chairman  and  gentlemen,  the  subject  set  down  for 
this  afternoon  is  really  divided  into  two  heads.  The  accounts  of 
public  service  industries  should  show  the  cost  of  construction  and 
operation,  and  also  the  relative  value  of  the  services.  With  the 


UNIFORM    MUNICIPAL    ACCOUNTING.  75 

strictly  accounting  side  of  the  subject  I  shall  not  attempt  to  deal.  I 
shall  confine  my  remarks,  as  far  as  possible,  to  the  means  of  determin- 
ing the  relative  value  of  the  services  rendered  under  public  and  under 
private  ownership.  The  first  essential  will  be,  as  indicated  in  the  first 
part  of  the  subject  consisting  of  accounting,  to  show  clearly  the  cost 
of  construction,  on  the  one  hand,  and  the  cost  of  operation,  on  the 
other.  That  is  an  absolute  essential  to  the  comparability  of  services 
rendered  by  a  private  party  and  those  rendered  by  a  municipality. 
In  order  to  make  that  comparison  it  is  necessary  to  take  a  great  many 
things  into  account;  many  things  to  which  heretofore  municipalities 
have  given  no  attention  whatever  in  their  accounting  systems,  owing 
largely  to  the  fact  that  as  a  rule,  in  the  United  States,  they  put  their 
hands  into  the  general  municipal  treasury  to  make  up  any  deficit  that 
may  arise  in  the  operation  of  a  waterworks  or  lighting  plant.  A  private 
company,  of  course,  has  recourse  to  no  such  doubtful  method  as  this, 
and  must  have  its  charges  under  services  sufficiently  high  to  include 
the  interest  on  bonds,  with  some  provision  eventually  for  the  retire- 
ment of  capital  or  an  accounting  of  capital,  insurance,  taxes,  and  a 
variety  of  other  things  which  I  will  not  enumerate,  as  well  as  operat- 
ing expenses. 

Now,  if  we  are  going  to  state  the  municipal  side  of  the  question, 
and  the  relative  advantages  of  the  one  over  the  other  plan,  it  becomes 
essential  that  a  municipality  should  parallel  the  accounts  of  private 
companies.  We  may  modify  them  to  suit  the  exigencies  of  the  case, 
but  all  these  various  items  must  be  taken  into  account  in  order  to 
compare  public  and  private  ownership.  The  topic  speaks  of  compar- 
ing the  value  of  the  services  rendered.  I  take  it  that  in  the  last 
analysis  that  means  the  cost  of  the  service,  or  possibly  the  profit  derived 
from  it.  It  seems  to  be  foreign  to  American  ideas  of  municipal  gov- 
ernment, as  a  rule,  to  attempt  to  make  a  profit  on  any  one  of  its 
public  service  industries;  that  is,  systematically  to  attempt  to  make 
a  profit.  Now,  as  a  matter  of  fact,  our  system  of  municipal  financier- 
ing and  our  tendency  is  to  get  money  where  we  can  get  it.  It  does 
happen  often  that  a  municipality  with  a  waterworks  plant,  for  instance, 
finds  that  it  can  earn  money  in  that  way,  by  making  a  profit  on  serv- 
ices. It  puts  the  revenue  from  the  waterworks  plant  into  a  general 
fund,  and  distributes  it,  so  far  as  waterworks  are  concerned,  over  a 
variety  of  other  accounts.  They  are  lost  in  the  general  treasury 
fund,  and  in  that  way  taxation  is  reduced.  That  is  done,  as  a  rule, 
in  a  haphazard  sort  of  way.  It  is  a  matter  of  accident  rather  than 
design,  because  there  is  scarcely  a  municipality  in  the  country  to-day 
that  really  knows  whether  or  not  its  waterworks  plant  or  lighting 
plant  is  paying  its  own  expenses.  Most  of  the  statements  we  see  on 
the  subject  are  misleading.  They  show  merely  the  difference  between 
gross  income  and  operating  expenses,  leaving  out  of  account  the 


76  UNIFOKM    MUNICIPAL    ACCOUNTING. 

interest  on  the  outstanding  indebtedness.  Even  if  the  interest  on 
outstanding  indebtedness  is  taken  into  account,  no  account  is  taken 
of  depreciation,  much  less  of  interest  charged  on  the  whole  inve.st- 
ment.  Coming  back  now  to  what  we  had  in  mind — the  comparability 
of  the  municipal  and  the  privately  owned  plant — we  must,  if  we  are 
going  to  compare  the  two,  take  into  account,  for  the  municipally 
owned  plant,  the  interest  on  the  total  investment.  A  private  com- 
pany has  to  take  that  interest  into  account.  It  must  pay  interest  on 
bonds,  and  it  must  pay  a  dividend  if  it  can.  If  we  are  going  to  state 
comparably  the  relative  advantages  of  municipal  and  private  owner- 
ship, we  must  do  the  same  thing  as  for  a  private  company,  in  respect 
to  charges.  We  shall  never  be  able  to  meet  the  arguments  by  the 
advocates  of  private  ownership  until  we  have  come  into  line  in  this 
particular.  We  have,  then,  from  the  point  ot  view  in  which  I  propose 
to  consider  this  subject,  a  desire  to  compare  the  cost  of  services  under 
two  plans  of  ownership,  because,  after  all,  we  are  discussing  the  munic- 
ipal ownership  question.  While  there  are  many  correlative  and  sub- 
sidiary things  that  affect  you  and  me  as  taxpayers,  or  as  patrons  of  a 
private  company  supplying  gas  or  water,  what  we  want  to  know  is 
what  we  are  going  to  pay  for  services. 

We  have,  first  of  all,  in  attempting  to  get  at  this,  the  gross  cost  of 
the  services,  regardless  of  the  parties  to  whom  service  is  rendered. 
By  parties  to  whom  the  service  is  rendered,  I  mean  whether  the  serv- 
ice is  rendered  to  private  consumers  or  the  municipality  itself,  for 
some  franchise  of  the  Government.  We  will  take  the  case  of  a  public 
waterworks  plant,  or  a  private  waterworks  plant :  There  we  have  the 
cost  of  the  water  that  is  supplied  for  private  consumers  in  houses, 
office  buildings,  and  for  manufacturing  purposes,  on  the  one  hand; 
and  on  the  other  hand,  the  cost  of  water  that  is  supplied,  or  more 
properly — because  we  must  take  capital  into  account — the  expense  or 
cost  of  the  works  and  the  operating  expenses  that  are  necessitated  by 
the  public  expense  of  street  cleaning,  flushing  sewers,  and  for  public 
buildings.  We  must  carefully  distinguish  between  these  two  classes 
of  services  rendered  under  either  plan  of  ownership ;  and  we  must  do 
it  for  a  variety  of  reasons.  We  must  do  it  not  only  to  make  our 
statistics  comparable,  but  we  must  do  it  in  justice  to  the  private 
consumer  of  water,  or  light,  or  what  not.  It  is  absolutely  unfair, 
unprincipled,  and  without  justification  to  do  as  many  cities  are  doing, 
namely,  collect  from  the  private  consumer  water  rates,  yet  never  to 
pay  the  cost  of  fire  protection,  street  sprinkling,  sewer  flushing,  water 
supplied  to  public  schools,  police  stations,  and  so  on,  through  all  the 
municipal  buildings.  It  is  unjust  and  unfair.  The  services  should 
be  strictly  and  rigidly  divided  or  distributed  between  the  two;  and 
this  is  especially  necessary  if  we  are  to  make  comparisons. 


UNIFORM    MUNICIPAL   ACCOUNTING.  77 

To  pursue  the  illustration  of  waterworks  further,  let  us  take  the 
elements  of  expense  of  the  waterworks  plant.  This  is  also  a  bar  to 
the  necessity  of  the  carefully  kept  construction  costs;  charges  on  the 
construction  cost.  If  any  city  were  to  attempt  to-day  to  build  a 
waterworks  plant  merely  to  supply  the  domestic  consumption  of 
water,  the  volume  of  water  available  from  it  would  be  very  small; 
that  is,  small  for  an  emergency  demand,  compared  with  what  it  would 
be  where  the  fire  protection  is  taken  into  account,  and  for  a  few  hours 
at  a  time  a  large  volume  of  water  is  used  for  the  extinguishment  of 
fire.  This  comes  in  more  particularly  in  connection  with  the  distribu- 
tion system.  The  pipes  that  would  supply  water  to  houses  and 
manufacturing  plants  would  be  much  smaller  if  they  were  not  called 
upon  to  supply  a  sufficient  volume  for  the  extinguishment  of  fires, 
and  here  you  see  we  have  a  large  item  of  capital  expense  which  is  due 
to  that  part  of  the  public  service  which  is  designed  for  fire  protection. 
Then  added  to  this,  although  of  least  importance,  is  the  increased 
cost  of  the  service  for  other  branches  of  the  municipal  works. 

We  must,  then,  carefully  distinguish  all  of  our  accounting  all  the 
way  through  between  the  construction  or  capital  charges  and  the 
maintenance  and  operating  expenses.  We  have,  of  course,  some 
very  troublesome  problems  when  we  attempt  to  do  this,  particularly 
when  we  attempt  to  work  out  the  capital  charges.  The  question  has 
been  raised  several  times  in  connection  with  the  discussion  at  previ- 
ous sessions  of  this  conference  regarding  interest  on  bonds  paid  off, 
depreciation,  and  related  subjects.  If  not,  it  would  be  out  of  the 
question  to  attempt  to  present  the  arguments,  pro  and  con,  important 
as  they  are.  The  question  can  be  raised,  but  I  will  not  attempt  to 
present  any  definite  and  classified  (much  less  a  dictatorial)  statement 
as  to  just  what  method  should  be  pursued ;  but  this  I  think  we  can 
all  agree  upon :  that  in  so  far  as  there  is  an  actual  handling  of  money 
we  can  reasonably  demand  that  there  shall  be  a  proper  distribution 
of  these  items  of  the  account,  and  that  the  expense  for  interest  shall 
be  charged  up  on  the  capital  side  of  the  account  every  time.  As  to 
whether  or  not  there  should  be  a  sinking  fund  and  a  depreciation 
charge  as  well,  there  is  a  very  great  difference  of  opinion;  but  the 
sinking  fund  must  be  taken  into  account.  It  is  absolutely  essential. 
In  order  to  make  our  figures  at  all  comparable,  we  have  to  get  at 
some  unit  prices,  because  it  is  useless  to  say  that  in  one  city  the 
operation  of  the  waterworks  or  electric  light  works  costs  so  many 
thousand  or  hundred  thousand  dollars,  and  in  another  so  much.  We 
can  not  reasonably  put  it  on  a  per  capita  basis,  because  most  per 
capita  statements  do  not  mean  anything  at  all.  How  little  many  of 
the  per  capita  figures  mean.  By  way  of  illustration,  I  want  to  point 
out  a  ridiculous  line  of  figures  that  went  into,  not  the  last  census,  but 


78  UNIFOKM    MUNICIPAL    ACCOUNTING. 

the  Eleventh  Census.  In  the  bulletins  that  were  issued  in  1890  there 
was  a  per  capita  statement  of  the  cost  of  street  lighting  in  New  York 
city.  In  some  of  the  outlying  districts  of  New  York  there  were  a  few 
naphtha  lamps,  the  total  maintenance  cost  of  which  was  a  few 
hundred  or  a  few  thousand  dollars,  and  they  divided  the  whole  popu- 
lation of  the  city  of  New  York  into  maintenance  cost  of  those  two  or 
three  hundred  naphtha  lamps,  and  figured  out  to  a  mere  fraction  what 
they  cost  in  New  York  city.  We  are  getting  away  from  that  sort  of 
thing  now  that  we  have  a  permanent  Census  Bureau.  That  is  one  of 
the  things  we  have  to  be  thankful  for.  We  must  have  unit  prices, 
but  I  can  not  go  far  enough  into  the  thing  to  outline  a  scheme  further 
than  to  illustrate  what  I  mean  by  that:  the  price  for  a  thousand 
gallons  of  water  that  is  supplied,  we  will  say,  for  domestic  and  munic- 
ipal purposes ;  the  cost  per  fire  hydrant,  we  will  say,  for  the  water  that 
is  supplied;  and  the  cost  of  the  plant 

The  cost  of  street  lamps  for  public  lighting  is  not  an  unimportant 
item,  because  there  are  street  lamps  and  street  lamps,  and  we  must 
take  into  account  the  number  of  hours  the  lamps  burn,  and  also  the 
candlepower  of  the  light  that  the  lamp  gives.  These  are,  perhaps, 
sufficient  to  illustrate  what  I  mean  by  unit  prices,  but  we  have  then 
only  a  gross  price.  We  have  not  anything  to  compare  if  one  city  is 
put  against  another  city;  because  if  we  take  waterworks — one  city 
may  locate  alongside  of  a  large  lake  or  river  which  will  provide  an 
ample  supply  of  water;  another  may  have  to  go  an  immense  dis- 
tance, and  of  two  cities  that  pump  their  water,  one  may  have  to  pump 
it  to  an  elevation  of  forty,  fifty,  or  a  hundred  feet,  and  another,  two 
or  three  hundred  feet.  The  cost  of  coal  in  one  municipality,  say  in 
the  Pittsburg  region,  for  steam  making  coal,  may  be  one  dollar  per 
ton,  while  up  in  New  England  the  same  grade  of  coal  may  be  three 
or  four  dollars  a  ton.  Then  we  must  correct  our  figures  from  the 
gross  prices  and  net  unit  prices  by  taking  into  account  the  labor  con- 
ditions in  the  several  municipalities — the  wages  per  hour  that  are 
paid  for  laborers  and  the  number  of  hours  they  work.  This  is  enough, 
perhaps,  to  show  that  most  of  the  statistics,  where  there  has  been  an 
attempt  to  compare  in  the  past,  are  utterly  and  absolutely  worth- 
less for  the  purpose.  The  time  has  come  when  there  is  a  demand 
for  comparable  statistics  in  attempting  to  deal  with  this  municipal 
ownership  question.  Municipal  ownership  is  going  on  apace,  and 
demands  for  it  are  increasing.  There  must  be  something  better  in 
the  way  of  statistics  than  we  have  had. 

As  many  of  you  know,  the  National  Civic  Federation  has  just 
launched  an  extensive,  wholesale  international  investigation  of  munic- 
ipal ownership,  and  on  Saturday  last  one  member  of  their  committee 
sailed  for  Europe.  They  began  about  six  months  ago  to  ransack 
for  available  statistics  over  there,  and  are  going  to  make  inquiries 


UNIFORM    MUNICIPAL   ACCOUNTING.  79 

on  similar  lines  in  this  country.  We  shall  see  more  and  more  the 
necessity  for  comparable  statistics  on  this  subject. 

The  CHAIRMAN.  You  all  know  that  Mr.  Baker  is  probably  the  first 
editor  in  the  United  States  to  become  a  student  of  this  subject.  He 
has  for  many  years,  in  his  paper,  led  the  agitation  for  honest  and  com- 
parable statistics,  and  no  man  has  done  more  in  the  newspapers  and 
in  other  ways  to  open  the  eyes  of  the  people.  It  is  with  great  pleas- 
ure that  we  see  him  here.  He  has  called  attention  to  the  investi- 
gation of  this  problem,  in  this  country  and  in  Europe,  that  is  being 
made  by  the  National  Civic  Federation. 

In  this  direction  the  preparation  of  a  schedule  for  this  work  has 
been  begun,  not  only  for  the  National  Civic  Federation,  but  for  the 
National  Municipal  League  and  for  the  Census  work.  Mr.  Harvey 
S.  Chase  has  prepared  a  schedule  for  the  study  of  the  members  of 
the  National  Municipal  League,  and  the  question  is  how  far  this  can 
be  adapted  to  the  work  of  the  Census  and  for  the  work  of  the  National 
Civic  Federation.  If  the  discussion  upon  this  can  lead  to  unity  or 
agreement  on  a  schedule,  we  shall  feel  that  we  shall  work  along  the 
same  lines.  Mr.  Chase  will  present  a  schedule  on  this  subject  that 
he  had  prepared  tentatively  and  to  provoke  discussion. 

(Mr.  Chase's  paper  follows.) 

MUNICIPAL    INDUSTRIES   AND    PUBLIC     SERVICE    CORPORATIONS — UNIFORM     SCHEDULES    FOR 
STANDARD   AND   COMPARATIVE   REPORTS. 

In  these  days  one  has  only  to  say  "municipal  ownership"  in  order  to  have  at  once  an 
interested  and  combative  audience.  This  question  is  an  exceedingly  important  one  and 
should  have  our  most  careful  attention. 

When  we  consider  the  appropriations  for  immense  sums  which  are  now  hanging  in  the 
balance  in  very  many  municipalities,  depending  upon  the  voting  power  of  the  public  whether 
such  sums  shall  be  expended  or  withheld,  we  must  appreciate  the  necessity  for  some  accu- 
rate and  standard  basis  for  such  far-reaching  decisions.  Upon  us,  as  municipal  financial 
officers,  public  accountants,  and  students  of  economics,  devolves  the  duty  of  providing 
such  a  basis  for  accurate  and  intelligent  comparisons  of  the  results  under  different  forms 
of  administration,  so  that  the  public  mind  may  become  informed  and  the  possibility,  at 
least,  of  intelligent  action  may  be  created. 

In  order  to  make  this  paper  as  brief  as  possible  and  at  the  same  time  effective,  I  will 
take  it  for  granted  that  all  of  us  are  hi  favor  of  the  principle,  that  annual  reports  of  munic- 
ipal industries — waterworks,  gas  works,  electric  works,  and  street  railways — and  the  annual 
reports  of  public  service  corporations,  which  perform  the  same  functions,  should  be  pub- 
lished upon  standard  schedules  and  be  uniform  so  far  as  is  practicable. 

The  necessity  for  such  standard  and  uniform  schedules  is  apparent.  No  argument  is 
needed.  It  is  evident,  also,  that  this  necessity  is  rapidly  becoming  more  and  more  imperative. 

The  National  Civic  Federation  has  appointed  recently  a  commission  of  one  hundred  men, 
representing  all  shades  of  opinion,  to  investigate  the  broad  question  of  municipal  owner- 
ship. This  commission,  of  which  the  writer  is  a  member,  has  appointed  a^committee  of 
twenty-one  to  supervise  and  carry  on  such  investigations  and  to  prepare  preliminary  reports  . 
The  committee  of  twenty-one  has  a  steering  committee  of  five,  who  have  laid  out  an  all-em- 
bracing programme  for  the  work.  The  labor  which  must  be  performed  in'these  investiga- 
tions is  tremendous,  while  the  importance  of  the  results,  if  impartially  and  accurately 
compiled,  can  scarcely  be  exaggerated. 

27311—06 6 


80  UNIFORM    MUNICIPAL   ACCOUNTING. 

The  committee  of  five  has  prepared  preliminary  schedules  for  use  in  obtaining  the  finan- 
cial data  for  waterworks,  gas  works,  electric  works,  and  street  railways,  both  publicly  owned 
and  privately  owned;  also  publicly  owned  and  privately  operated. 

I  desire  to  take  these  schedules  as  the  basis  for  this  paper  and  discuss  them  here,  in  the 
hope  that  suggestions  be  made  which  will  improve  the  schedules  and  make  them  standard 
and  uniform.  Such  schedules  must  be  "practical,"  both  from  the  private  corporation 
point  of  view  and  from  the  public  industry  viewpoint.  Without  further  introduction, 
therefore,  I  submit  Schedule  A,  "Revenue  and  expense,"  or  "Income  and  expenditure," 
as  our  British  brothers  designate  the  same  idea.  The  schedule  is  designed  as  a  form  for  a 
consolidated  statement  of  the  total  income  accrued  and  the  total  expense  incurred  for  the 
fiscal  year,  irrespective  of  whether  or  not  this  "income"  has  yet  been  actually  collected 
into  cash,  and  whether  or  not  this  "expense"  has  yet  been  paid  in  cash. 

(Mr.  Chase  presented  at  this  point  the  schedule,  which  is  printed 
(.as  amended)  on  page  115  of  these  minutes.) 

I  desire  to  call  your  attention  to  a  number  of  important  points. 

First.  It  is  evident  that  revenue  from  sales  of  product — water,  gas,  electricity,  power 
etc. — should  be  separated  from  revenue  from  extraneous  sources,  such  as  from  rents,  or 
from  investments  and  securities,  etc.  In  the  schedule  these  extraneous  sources  of  revenue 
are  set  forth  at  the  very  end  of  the  schedule  and  do  not  affect  the  financial  results  of  the 
business,  viewed  solely  as  a  gas  undertaking,  an  electric  undertaking,  etc. 

Second.  It  is  evident  that  discounts,  rebates,  refunds,  etc.,  should  be  handled  as  deduc- 
tions from  revenue,  not  added  to  "expense."  True  "earnings"  being  thus  obtained,  we 
will  next  consider  "expense."  There  are  three  primary  divisions  of  expense. 

1.  "Expense  for  manufacture,"  pertaining  to  gas,  electricity,  or  power  for  street  rail- 
ways, this  subdivision  for  water  being  called  "expense  for  water  supply  and  storage." 

2.  "Expense  for  distribution,"  which  explains  itself.     Each  of  these  two  divisions  is 
subdivided  into  "operation"  and  "maintenance;"  "operation"  covering  strictly  running 
expenses  and  "maintenance"  covering  repairs  and  supplies.     These  subdivisions  are  essen- 
tial for  this  reason:  That  as  this  schedule  is  to  apply  both  to  public  plants  and  to  private 
plants  the  relative  cost  of  "operation" — that  is,  actual  running  expense — should  be  evi- 
dent, and  likewise  the  relative  amounts  expended  or  laid  aside  for  repairs,  including  supplies, 
should  be  in  evidence. 

Comparing  the  public  enterprise  with  the  private  enterprise,  the  operation  expense  of 
the  first  plant  may  be  heavier  than  the  corresponding  expense  of  the  second  plant,  while 
the  maintenance  (repairs)  expense  of  the  first  may  be  much  less  than  that  of  the  second. 
Important  differences  in  administration  would  thus  be  shown  by  our  schedule;  whereas,  if 
these  items  appeared  only  as  a  total  in  each  plant,  these  totals  might  be  approximately  the 
same,  and  conclusions  drawn  therefrom  might  then  be  exceedingly  misleading. 

3.  The  third  division  of  expense  is  "general  expense,"  a  designation  which  we  all  under- 
stand.    The  important  point  here  is  that  "general  expense"  shall  not  include  any  of  the 
items  which  are  sure  to  differ  very  materially  between  public  plants  and  private  plants  per 
se.     That  is  to  say,  taxes  and  franchise  payments  are  distinctively  private  plant  charges; 
sinking  fund  provisions  are  commonly  only  public  plant  charges.     Insurance  differs  very 
greatly;  interest  varies  marked!?';  damages  and  extraordinary  legal  expenses  apply  differ- 
ently; depreciation  is  usually  inadequately  handled,  etc.     Therefore  we  do  not  include  any 
of  these  variables  in  "general  expense."    They  follow  later  hi  the  schedule. 

The  total  of  the  three  primary  divisions  of  "expense"  is  then  given.  At  this  point  com- 
parisons of  the  results  between  public  and  private  administrations  can  be  made  safely,  as 
ah1  the  preceding  elements  are  identical  in  character.  This  point  is  therefore  a  crucial  one 
and  should  be  emphasized  strongly  in  the  reports. 

Variable  items. — "Variable  items"  include  all  additional  items  which  are  correct  charges 
against  revenue  before  true  "profits"  can  be  established.  These  items  represent  actual 
facts,  even  though  they  may  be  omitted  in  the  bookkeeping.  Taxes  are  paid  by  private 


- 

UNIFORM    MUNICIPAL    ACCOUNTING.  ^  81 

plants,  but  usually  lost  to  the  public  treasury  through  public  plants.  They  must  be  prop- 
erly considered  for  true  comparisons.  Insurance,  in  its  various  phases,  is  a  risk  to  be  taken 
and  estimated,  or  paid  for. 

Damages  and  legal  expenses  (extraordinary)  differ  greatly  between  public  and  private 
plants  and  are  therefore  set  up  separately  here.  Guaranty  for  losses  on  bad  debts  or  other 
shrinkages  of  current  assets  is  also  variably  handled.  Depreciation  of  machinery  and 
plant  is  complicated  and  difficult  to  aUow  for,  and  yet  it  goes  on  daily  and  hourly  in  every 
plant.  It  must  be  provided  for,  whether  or  no. 

These  "items"  are  true  charges  against  revenue  before  profits — "net  revenue" — can  be 
determined. 

Owing  to  different  methods  of  providing  capital  for  public  plants  and  for  private  plants 
the  returns  upon  (or  repayments  of)  such  capital  must  be  carefully  considered  in  the  reports 
and  disclosed  in  the  schedules.  Public  capital  is  borrowed  usually  on  bonds  or  notes  and 
paid  off  through  sinking  funds.  Payments  into  sinking  funds  for  such  a  purpose  are  there- 
fore distributions  of  profits  just  as  much  as  dividends  upon  share  capital  in  private  plants 
are  distributions  of  profits.  Interest  also  is  a  payment  for  use  of  capital — borrowed  capital, 
to  be  sure,  but  still  capital.  Payments  of  interest  are  therefore  actually  distributions  of 
profits  paid  upon  borrowed  capital  in  place  of  dividends  upon  share  capital. 

In  order  to  correctly  compare  distributions  of  profits  in  private  plants  with  the  same  in 
public  plants,  we  must  consider  the  total  of  dividends,  interest,  and  sums  laid  aside  for 
franchise  amortization  in  the  former  against  the  total  of  interest  and  sinking  fund  items 
similarly  laid  aside  in  the  latter. 

The  next  division  of  the  schedule,  "application  of  net  revenue,"  is  therefore  of  fundamen- 
tal importance.  All  of  the  items  included  thereunder  have  no  relation  to  "expense." 
They  are  merely  distributions  of  profits.  That  this  is  true  of  dividends  is  universally 
accepted.  That  it  is  true  of  moneys  laid  aside  for  sinking  funds  is  also  evident  after  a 
moment's  thought.  To  consider  "interest"  in  the  same  category  is  perhaps  difficult  for 
the  average  fiscal  officer,  but  it  is  apparent  that  this  item  represents  the  use  of  capital — in 
this  case  borrowed  money. 

It  would  be  impossible  to  compare  net  revenue  of  public  and  private  plants  if  interest 
were  put  above  the  line  while  dividends  were  left  below  the  line.  Take  for  instance  a 
private  corporation  with  $500,000  share  capital  and  no  bonds,  and  a  municipal  industry 
with  $500,000  of  4  per  cent  bonds  outstanding.  If  interest  were  put  above  the  line,  the 
public  plant  would  be  charged  $20,000  as  an  expense  item,  whereas  the  private  plant 
would  have  no  such  charge  above  the  line.  This  distinction  is  essential  and  must  be  care- 
fully observed  for  all  comparative  purposes. 

The  remainder  of  the  schedule  explains  itself,  and  I  ne$d  say  only  that  each  of  the  items 
given  in  this  consolidated  statement  should  be  set  forth  in  detail  on  subsidiary  supporting 
schedules  which  should  follow,  in  the  mam,  the  uniform  distribution  of  the  accounts  pro- 
vided in  the  standard  schedules  of  the  American  Water  Works  Association,  the  American 
Gas  Light  Association,  the  National  Electric  Light  Association,  and  the  Association  of 
Street  Railway  Accountants. 

It  will  be  found  feasible  and  practicable  to  draw  off  the  items  needed  for  the  consolidated 
statement,  herewith  submitted,  directly  from  the  standard  detailed  schedules  of  these  four 
national  associations.  The  purpose  of  the  writer  in  presenting  the  consolidated  statement 
was  to  have  it  carefully  considered,  amended,  and  adopted  at  this  meeting,  and  thereafter 
to  have  it  acted  upon  by  the  American  Association  of  Public  Accountants  and  by  the 
National  Municipal  League.  It  is  proposed,  then,  to  submit  the  final  forms  to  the  investi- 
gating committee  of  twenty-one  of  the  National  Civic  Federation  with  the  request  that 
these  forms  be  utilized  as  the  basis  of  the  financial  reports  which  will  be  made  hereafter 
by  that  committee  upon  public  and  private  enterprises  in  this  country  and  abroad. 

Schedules  thus  standardized  and  accepted  will  thereupon  become  the  foundation  upon 
which  the  accumulation  of  data  can  be  made  safely  for  years  to  come.  Results  predicated 


82  UNIFOBM    MUNICIPAL    ACCOUNTING. 

upon  such  data'can  then  be  accepted  and  acted  upon  intelligently,  in  the  light  of  local 
conditions,  in  any  community  which  may  consider  the  purchase  or  establishment  of  munici- 
pal enterprises  of  this  nature. 

The  CHAIRMAN.  Opportunities  for  questions  will  now  be  offered 
to  anyone  who  desires  to  ask  them. 

Mr.  MAC!NNES.  Mr.  Chairman,  I  appreciate  very  much  the  re- 
marks of  Mr.  Chase,  coming  so  appropriately  after  those  of  Mr.  Baker. 
I  wish  to  point  to  one  or  two  things  on  this  schedule  wherein  I  seem 
to  differ  from  Mr.  Chase  in  his  statement  of  expense— based  on  the 
language  of  this  schedule.  Would  it  apply  equally  to  the  operation 
of  a  public  enterprise  and  that  of  a  private  corporation?  It  partic- 
ularly bore  on  the  distribution  made  on  charges  on  account  of  capital, 
claiming  that  the  payment  of  dividends  in  the  case  of  a  private  cor- 
poration was  practically  similar  to  the  provision  for  sinking  fund 
requirements  on  the  part  of  a  public  enterprise. 

Mr.  CHASE.  That  being  both  distributions  and  profits. 

Mr.  MAC!NNES.  In  the  first  place,  the  payment  of  dividends  by 
private  corporations  is*  a  division  of  a  certain  part  of  its  profits; 
and  in  the  second  place,  it  is  the  setting  aside  of  the  profits.  To  my 
mind  they  bear  the  same  relation  as  does  the  payment  of  rent  for 
premises  that  you  occupy  to  the  installment  payments  for  that 
property.  People  will  always  go  on  paying  rent;  so  to  my  mind 
there  is  here  a  special  difficulty,  and  the  two  can  not  be  looked  upon 
as  being  synonymous.  Furthermore,  in  considering  the  question  of 
what  should  properly  constitute  the  expense  of  an  enterprise  con- 
ducted by  the  people  for  themselves,  such  as  waterworks,  etc.,  we 
should  bear  in  mind  that  we  have  no  right  to  inflict  on  the  present 
generation  a  greater  amount  of  expense  than  we  should  reasonably 
place  there.  If  you  are  going  to  maintain  your  waterworks  through- 
out in  a  state  of  efficiency,  and  you  are  going  to  set  aside  out  of  the 
revenue  derived  therefrom  every  year  so  and  so  much  for  sinking 
fund  purposes,  why  should  you  also  provide  for  depreciation?  We 
are  seeking  to  impose  at  the  same  time  on  the  public  enterprise  a 
greater  expense  than  you  would  impose  upon  the  private  corporation, 
and  then  seek  to  draw  conclusions  from  that.  Such  conclusions 
would  be  favorable  to  the  public  enterprise.  You  seek  to  impose 
the  interest  charges  on  the  public  enterprises,  whether  that  has  been 
paid  out  of  revenue  or  whether  it  has  been  borrowed  in  anticipation 
of  revenue,  because  after  all  it  all  has  to  come  out  of  revenue.  If 
you  are  to  charge  interest  on  the  cost  when  that  cost  has  been  already 
paid,  then  you  must  surely  give  credit  in  the  public  enterprise  for 
the  protection  of  public  buildings  of  all  kinds. 

Mr.  CHASE.  Mr.  Maclnnes,  if  you  will  excuse  me  just  a  moment, 
I  think  I  can  prove  to  you  that  we  are  on  identical  lines.  For 
instance,  the  statement  you  have  made  is  identical  with  the  schedule. 


I 
UNIFORM    MUNICIPAL   ACCOUNTING.  83 

Mr.  MAC!NNES.  Well,  we  don't  quite  agree,  because  I  realize  a 
distinction  with  a  great  difference. 

The  CHAIRMAN.  I  would  mention  the  rule  as  adopted  this  morning. 
Will  you  extend  the  time  for  Mr.  Maclnnes? 

Mr.  MAC!NNES.  Mr.  Chairman,  I  beg  your  pardon;  I  did  not  know 
I  was  transgressing. 

The  CHAIRMAN.  We  have  now  fifteen  minutes  left  for  this  general 
subject,  and  we  want  to  have  the  whole  time  taken  up.  Well,  Mr. 
Chase,  I  think  if  no  one  wants  an  extension,  Mr.  Maclnnes  should 
have  the  preference,  unless  some  one  else  wants  the  time. 

Mr.  CHAPMAN.  I  have  only  a  suggestion  to  make.  As  I  understand 
the  charges — both  revenue  charges  and  charges  on  capital  account — 
some  would  apply  in  the  case  of  corporations  and  not  to  cities,  and 
the  object  is  to  have  the  form  available  to  meet  that  contingency,  but 
the  account  starts  with  the  title  "  revenue  and  expense,"  and  it  seems 
as  if  there  had  been  some  recantation  on  that.  If  revenue  and  ex- 
pense is  the  title  of  the  blank,  the  A  and  B  should  be  revenue  and 
expense;  and  if  income  and  expense  is  the  title  of  the  blank,  income 
and  expense  should  be  the  title.  In  the  first  instance  it  takes  the  cap- 
tion from  the  first  title  and  expense  from  the  end  of  the  first  title. 
Now,  income  and  revenue  have  a  slightly  different  meaning;  they 
have  restricted  meanings.  The  word  revenue  is  sometimes  used  not 
with  respect  to  income.  When  we  come  down  to  the  charges  or  cap- 
ital account,  I  object  to  charges  at  all. 

The  CHAIRMAN.  We  have  seven  minutes  more  before  the  time  for 
closing  under  the  rule  of  the  morning.  We  should  be  glad  to  hear 
short  comments  or  statements. 

Mr.  MOMSEN.  Mr.  Chairman,  I  want  to  make  a  suggestion  in  this 
connection.  Under  the  heading,  "  charges  on  account  of  revenue," 
appears  the  item,  "taxes  and  franchise  payments."  There  is  a 
growing  popular  demand  for  information  as  to  the  amount  contrib- 
uted by  public  service  corporations  for  the  use  of  public  streets 
and  highways.  This  item  includes  the  taxes  which  every  corpora- 
tion and  every  person  has  to  pay  in  any  given  city,  with  franchise 
payments  which  are  made  for  a  specific  purpose  and  for  the  specific 
privilege  of  using  the  public  streets.  For  that  reason  I  think  that  a 
separation  of  taxes  and  franchise  payments  would  be  very  desirable 
and  of  value  to  the  public  at  large. 

Mr.  REX.  Mr.  Chairman,  the  discussion  in  relation  to  this  schedule 
as  prepared  by  Mr.  Chase  has  been  very  interesting  to  me.  It  is  some- 
thing that  we  are  taking  up  with  considerable  care,  and,  for  the  pur- 
pose of  arriving  at  some  definite  conclusion  in  relation  to  this,  I  move 
that  the  chair  appoint  a  committee  of  five  to  take  into  consideration 
this  schedule. 

Mr.  RIVES.  I  second  the  motion. 


84  UNIFORM    MUNICIPAL    ACCOUNTING. 

The  CHAIRMAN.  All  those  in  favor  of  the  motion  will  signify  it  by 
saying  "  Aye."  I  appoint  Mr.  Maclnnes  as  chairman  of  that  com- 
mittee and  Mr.  Upham,  Mr.  Chapman,  Mr.  Rex,  and  Mr.  Chase. 

The  time  for  the  close  of  this  discussion  proper  has  come,  and  as 
there  seems  to  be  a  little  misunderstanding  with  reference  to  the  rule 
adopted  this  morning,  let  me  read  the  rule  as  it  was  adopted. 

We  will  now  listen  to  Doctor  Cleveland's  paper  on  "The  Glossary 
of  Terms/'  proposed  by  the  committee  of  the  National  Municipal 
League. 

(Doctor  Cleveland's  paper  follows.) 

THE    NEED   FOR    UNIFORMITY    IN    NOMENCLATURE    AND   PHRASEOLOGY. 

The  keynote  of  this  convention  was  sounded  by  Mr.  North,  by  Doctor  Hartwell,  and  by 
our  chairman  in  their  appeal  for  standardization.  What  we  need  is  standardization  of  clas- 
sification, standardization  of  nomenclature  and  phraseology,  and  standardization  of  reports. 
But  standardization  for  what  purpose?  In  order  that  we  may  have  a  common  language 
for  the  communication  of  ideas,  that  we  may  each  transmit  to  the  other  and  take  to  himself 
the  ideas  which  grow  out  of  the  situations  presented  in  the  cities  and  towns  of  the  United 
States.  The  municipal  problem  is  before  us  demanding  scientific  solution.  To  do  this 
each  must  put  himself  on  the  same  level  as  those  interested  in  botanical  or  zoological 
research.  They  have  scientifically  determined  titles  to  ideas,  which  represent  to  them  cer- 
tain and  definite  conclusions  drawn  from  uniform  classification  of  facts,  and  the  classification 
of  data  is  the  result  of  work  on  the  part  of  many  investigators.  This,  Mr.  Chairman,  is 
what  I  understand  you  to  mean  by  standardization. 

Municipal  graft  and  misgovernment  have  grown  out  of  lack  of  intelligent  control.  From 
small  beginnings  the  city  has  grown.  In  a  village  or  town  every  citizen  may  be  said  to  have 
cognizance  of  all  the  acts  and  doings  of  officers  and  employees.  It  was  under  such  a  regime 
of  simple  decentralized  democracy  that  we  conceived  the  notion  that  we  did  not  need  any 
system  of  accounts  and  reports.  The  town  became  larger;  its  revenues  grew.  An  absentee 
or  defaulting  treasurer  suddenly  aroused  citizen  taxpayers  to  a  realization  that  the  public 
purse  had  not  been  properly  safeguarded.  This  led  to  the  introduction  of  a  system  of  con- 
trolling cash  accounts  and  treasury  fidelity  bonds  as  a  means  of  protecting  the  municipality 
against  fiscal  infidelity.  The  town  became  a  city;  and  instead  of  a  town  meeting,  a  council 
represented  the  relation  of  sovereign  proprietorship  in  the  municipality.  No  longer  has  the 
citizen  knowledge  of  the  doings  of  officer  and  agent;  even  the  officers  themselves  have  no 
immediate  control,  many  details  of  business  being  intrusted  to  employees. 

Although  the  treasury  has  been  made  safe  against  misappropriations,  it  is  not  immune 
to  the  insidious  devices  of  a  political  boss  or  an  organized  gang  operating  through  a  servile 
assembly.  Against  this  an  audit  is  installed,  and  a  comptroller  elected  to  protect  the  peo- 
ple; but  the  comptroller  can  not  execute;  he  can  only  scrutinize  and  pass  for  payment  that 
which  is  regular  and  discard  that  which  is  irregular.  The  whole  question  of  administration — 
economy  and  efficiency  of  service — is  still  untouched. 

A  municipality  is  a  corporation  created  by  law  for  the  purpose  of  rendering  public  service. 
The  coproprietors  of  this  corporation  are  citizens.  But  citizens  have  no  power  to  partici- 
pate directly  in  its  affairs.  The  corporation  can  act  only  through  legally  appointed  servants. 
These  corporate  servants  are  of  three  kinds:  (1)  Direct  representatives  of  the  people — the 
council;  (2)  the  officers  who  are  elected  or  appointed  to  administer — to  carry  out  instruc- 
tions of  the  council  and  of  the  charter;  (3)  employees  appointed  by  officers  to  attend  to  the 
minute  details  of  the  city's  business.  Intelligent  administrative  control,  which  looks 
toward  economy  and  efficiency  of  service,  therefore  must  be  of  three  kinds:  (1)  The  official 
control  of  the  officers  over  the  employees;  (2)  the  representative  control  of  the  council  over 
officers;  and  (3)  the  proprietary  control  of  citizens  over  the  council  and  the  other  selected 
agents. 


UNIFORM    MUNICIPAL   ACCOUNTING.  85 

Intelligent  control  of  any  kind  must  have  for  its  foundation  exact  information  as  a  basis 
for  judgment,  with  respect  to  economy,  efficiency,  and  fidelity  of  service.  This  exact  infor- 
mation must  be  collected,  classified,  and  summarized  or  coordinated  around  the  various 
problems  of  administration,  concerning  which  the  citizen,  the  council,  and  the  officer  mus^ 
think.  In  other  words,  the  information  must  have  reference  to  the  several  kinds  or  classes 
of  public  services  to  be  rendered,  and  must  be  so  arranged  as  to  show  the  economy  and  the 
efficiency  with  which  it  is  performed.  And  by  reason  of  the  fact  that  the  city's  business 
can  only  be  effectively  carried  on  by  means  of  adequate  funds  and  equipment,  there  must 
also  be  information  which  will  show  a  strict  account  of  assets  and  protect  the  municipality 
agaiast  the  loss  of  its  natural  resources.  To  think  intelligently  about  any  problem  of  admin- 
istration the  city  must  employ  a  staff  of  bookkeepers,  accountants,  and  statisticians  to  col- 
lect the  data  and  arrange  the  financial  and  statistical  facts  in  accounts  and  summaries  to  be 
laid  before  officers  and  representatives.  Furthermore,  the  summary  must  be  published 
to  the  citizen  in  such  form  that  he  may  judge  whether  these  public  servants  have  fulfilled 
the  purpose  of  their  employment.  The  desire  for  such  an  arrangement  of  financial  and 
statistical  facts  is  the  animus  of  the  movement  which  gave  rise  to  the  National  Municipal 
League,  to  the  Civic  Federation,  to  the  League  of  American  Municipalities,  and  to  the  branch 
of  Census  work  which  has  been  the  occasion  for  this  conference. 

Nomenclature  presumes  classification,  and  classification  should  proceed  from  the  admin- 
istrative and  citizen  control  which  is  sought  to  be  established.  Uniformity  in  classification 
and  nomenclature  must  depend  on  uniformity  in  municipal  functions.  What  are  the 
functions  and  administrative  problems  common  to  municipalities?  For  the  purpose  of 
discussion  these  are  set  out  as  follows: 

TABLE  I. — General  classification  of  municipal  expenses  and  income. 


Current  expenses. 


Current  income. 


I.— Expenses  of  general  government. 

1.  Election  and  appointment  of  officers. 

2.  General  administration. 

3.  Protection  of  life,  health,  and  property. 

4.  Public  charities  and  correction. 

5.  Highways  and  sewers. 


I.— Revenues  for  general  government. 

1.  Taxes. 

2.  Licenses. 

3.  Miscellaneous  revenues. 

(a)  Of  general  officers  and  offices. 

'  b)  \  or  protection   of    life,   health,   and 


property. 

(c)  For  public  charities  and  correction. 

(d)  For  public  highways  and  sewers. 
Total  expenses  of  general  government.                         Total  revenues  of  general  government. 

II. — Expenses  of  public  education  and  recreation.     II. — Revenues  for  and  income  from  public  educa- 
tion and  recreation. 

1.  For  public  schools.  1.  For  schools  and  from  tuition. 

2.  For  public  libraries,  art  galleries,  and  mu-  2.  Income  from  public  libraries,  art  galleries, 

seums.  and  museums. 

3.  For  public  recreation.  3.  Income  from  parks,  playgrounds,  gymna- 

sia, etc. 
III.— Expenses  of  public  industries  and  invest-     III.— Earnings  and  income  from  public  industries 

ments.  and  investments. 

1.  Waterworks.  1.  Waterworks. 


2.  Gas  works. 

3.  Electric  light  and  power  plants. 

4.  Street  railways.  4.  Street  railways. 


2.  Gas  works. 

3.  Electric  light  and  power  plants. 


.ght  and  power  plant 
Iways. 


5.  Subways  and  conduits. 

6.  Other  municipal  industries. 

7.  Municipal  investments. 
IV.— Other  municipal  expenses. 


5.  Subways  and  conduits. 

6.  Other  municipal  industries. 

7.  Municipal  investments. 
IV.— Other  municipal  income. 


It  will  be  noted  that  in  general  the  classification  given  is  similar  to  that  used  by  the 
Census  Bureau,  the  difference  being  that  the  subclasses  "election  and  appointment  of 
officers,"  "general  administration,"  "protection  of  life,  health,  and  property,"  and  the 
"maintenance  of  highways  and  sewers"  have  been  grouped  under  Caption  I  ("general 
government").  The  other  classes  of  income  and  expenses  of  operation  are  placed  under 
Caption  II  ("public  education  and  recreation")  and  Caption  III  ("public  industries  and 
investments").  This  general  classification  is  used  for  the  following  reasons:  (1)  That  all 
those  functions  collected  under  the  first  class,  denominated  "general  government,"  have 


86  UNIFORM    MUNICIPAL    ACCOUNTING. 

to  do  with  the  exercise  of  governing  activities  and  are  for  the  purposes  of  social  control  or 
public  convenience.  This  is  the  body  of  activities  for  which  the  municipality  was  primarily 
organized.  (2)  The  municipal  functions  which  come  under  the  second  general  class  ("  edu- 
cation and  recreation")  have  to  do  with  social  betterment  and  are  not  necessary  to  gov- 
erning control.  (3)  Those  in  the  third  class  ("municipal  industries  and  investments") 
have  to  do  with  public  economies.  Each  of  the  general  classes,  therefore,  have  a  logical 
basis  and  an  institutional  difference  which  make  them  the  subject  of  distinct  administrative 
consideration  and  separate  statistical  classification. 

What  is  denominated  "general  government"  comprises  functions  which  it  is  necessary 
for  a  city  to  undertake  as  a  means  of  protecting  the  urban  community  against  disorder, 
disease,  interference  with  trade,  and  conditions  which  would  render  city  life  unsafe  or  impos- 
sible. Whether  education  be  public  or  private;  whether  the  city  provides  art  galleries, 
museums,  or  parks;  whether  it  undertakes  to  own  or  operate  public  utilities — the  general 
functions  carried  on,  under  the  designation  of  "general  government,"  must  be  maintained 
at  any  cost.  These,  therefore,  are  first  to  be  considered  in  budgets  and  estimates  of  revenue 
necessities;  these  activities  must  be  administered  on.  To  follow  the  outline  above  referred 
to:  (1)  Elections  and  appointments  of  officers  are  a  primary  necessity,  for  without  officers 
or  agents  no  public  business  whatever  could  be  transacted;  (2)  for  the  same  reason,  the 
general  officers  and  offices  must  be  provided  for;  (3)  whenever  the  community  becomes 
so  large  as  not  to  be  self  regulatory,  the  police  department,  the  fire  department,  the  health 
department,  must  be  maintained  as  a  means  of  protecting  life,  health,  and  property;  (4) 
public  charities  and  corrections  are  essential  to  care  for  the  impotent,  the  dependent,  and 
the  criminal  classes;  (5)  the  regulation  and  maintenance  of  highways  and  sewers  are 
functions  which  the  city  in  its  corporate  capacity  alone  may  handle  safely.  Administra- 
tively and  organically,  therefore,  these  functions  are  in  the  nature  of  government;  while 
being  common  to  all  municipalities,  from  a  statistical  point  of  view,  these  summaries  and 
totals  are  more  nearly  on  a  comparable  basis  than  any  other  class  of  municipal  facts. 

As  respects  the  activities  of  the  second  general  class  ("public  education  and  recreation") 
there  is  no  uniformity.  In  some  communities  the  schools  are  more  largely  private;  in 
others,  the  public  schools  are  conducted  by  separate  and  distinct  corporations;  in  these, 
again,  the  school  districts  may  not  be  coterminous  with  the  territory  of  boundaries  of  the 
city.  Another  city  may  provide  schooling  for  a  large  contiguous  population,  without 
requiring  payments  for  tuition.  With  libraries,  museums,  and  parks  there  is  still  greater 
variety,  in  practice,  in  organization,  in  expense,  and  in  revenue  provisions.  In  one  city 
there  may  be  none  of  these  activities — no  facilities  for  recreation  or  entertainment,  for 
instance.  The  parks  may  be  managed  by  a  state  board  or  a  distinctly  local  organization; 
one  city  may  have  baths,  gymnasia,  playgrounds,  race  tracks,  etc.;  another  may  have  an 
unimproved  common  or  field  that  has  been  obtained  by  private  bequest.  Not  only  the 
fact  that  public  education  and  recreation  is  a  distinct  class  in  kind,  but  also  irregularity 
and  lack  of  uniformity  of  function  suggests  the  advisability  of  segregation  from  the  first 
class  above  enumerated. 

Concerning  the  third  general  class  of  data  ("municipal  industries  and  investments") 
there  is  no  room  for  dispute,  since  all  concede  that  they  should  be  displayed  separately 
in  public  reports  and  statistics;  but  the  primary  reason  for  the  segregation  of  facts  pertain- 
ing to  public  industries  and  investments  is  the  same  as  that  above  urged,  namely,  that 
they  present  a  distinct  set  of  administrative  and  financial  problems. 

With  respect  to  assets  and  liabilities,  there  are  two  general  classes  of  relations  to  be 
administered  on.  The  one  has  to  do  with  the  resources  in  hand,  as  a  means  of  meeting 
current  expenses,  and  the  payment  of  current  liabilities;  the  other  has  to  do  with  the 
protection  of  permanent  properties  and  equipment  against  loss  and  impairment.  These 
facts  suggest¥the^administrative^advantage^of  having  two  distinct  classes  of  accounts, 
as  a  means  of  distinguishing  what  may  be  called  current  assets  and  liabilities  from  capital 
assets  and  liabilities.  The  same  reasoning  would  require  that  both  the  officer  and  the 


UNIFORM   MUNICIPAL   ACCOUNTING. 


87 


citizen  should  know  what  is  the  surplus  or  deficit  in  current  assets,  as  distinct  from  the  net 
capital  of  the  community  invested  in  permanent  properties  and  equipment. 

TABLE  II. — General  classification  of  current  assets  and  current  liabilities  of  municipalities. 


Current  assets. 


Current  liabilities. 


1.  Cash  on  hand  (exclusive  of  capital  and  trust 

accounts). 

2.  Uncollected  revenues  receivable. 

3.  Current  credit  assets  (receivable). 

4.  Judgments  receivable. 

5.  Sinking  funds  applicable  to  debts  due. 

6.  Current  working  assets. 


Total  current  assets. 
Current  deficit. 


1.  Current  revenue  liabilities. 

2.  Current  credit  liabilities. 

3.  Current  judgment  liabilities. 

4.  Current  funded  obligations. 


Total  current  liabilities. 
Current  reserves  and  surplus. 

(a)  Current  cash  reserves. 

(6)  Current  revenue  reserves. 

(c)  Reserves  for  loss  and  cost  of  collecting 

current  credit  assets. 

(d)  Reserves  for  loss  and  cost  of  collecting 

judgments  receivable. 
Total  current  reserves. 
Available  current  surplus. 

(a)  Net  available  current  cash. 
(6)  Net  available  current  assets  other  than 
cash. 


Assuming  that  this  is  true,  there  should  also  be  a  distinct  accounting  for  capital  funds 
as  distinguished  from  current  cash.  There  should  be  no  commingling  of  "smking  funds," 
"endowment  funds,"  "permanent  improvement  funds,"  "balances  on  hand  from  bond 
sales,"  etc.;  otherwise  the  tendency  would  be  either  intentionally  or  unintentionally  to 
apply  capital  funds  to  current  uses,  instead  of  providing  adequately  for  current  expenses 
and  obligation  out  of  current  revenues.  In  the  outline  below  the  several  administrative 
problems  pertaining  to  assets  and  liabilities  are  suggested  by  way  of  classification. 

TABLE  III. — General  classification  of  capital  assets  and  capital  liabilities  of  municipalities. 


Permanent  properties,  equipment,  and  funds. 


Liabilities  incurred  for  permanent  uses  and 
invested  reserves. 


I.— Funds  not  applicable  to  current  uses. 

1.  Sinking  funds. 

2.  Endowment  funds. 

3.  Permanent  improvement  funds. 

4.  Balances  on  hand  from  bond  sales. 

5.  Other  capital  funds. 
Total  capital  funds. 

II. — Permanent  properties  and  equipment. 

1.  For  general  government. 

(a)  Sites  and  grounds. 

(&)  Buildings  and  improvements. 

(c)  Equipment. 

2.  For  education  and  recreation. 

(a)  Sites  and  grounds. 

(6)  Buildings  and  improvements. 

(c)  Equipment. 

3.  For  municipal  industries  and  investments. 

(a)  Sites  and  grounds. 

(6)  Buildings  and  improvements. 

(c)  Equipment. 

(d)  Municipal  investments." 

Total  permanent  properties  and  equipment. 


I.— Capital  liabilities  outstanding. 

1.  For  general  government. 

(a)  Municipal  buildings  (city  hall  and 
general  offices). 

(&)  Municipal  prisons,  armories,  and  hos- 
pitals. 

(c)  Public  highways  and  sewers. 

(d)  Etc.,  etc.,  etc. 

2.  For  public  education  and  recreation. 

(a)  Public  school  buildings. 
(&)  Public  libraries  and  art  museums, 
(c)  Public  parks  and  boulevards,  play- 
grounds, and  gymnasia. 

3.  Public  industries. 

(a)  Public  waterworks. 

(&)  Public  gas  works,  etc.,  etc. 

4.  Other  capital  liabilities. 
Total  capital  liabilities. 

II. — Capital  reserves  and  surplus. 

1.  Capital  reserves. 

(a)  Sinking  fund  reserves. 
(&)  Other  capital  reserves. 
Total  capital  reserves. 

2.  Invested  capital  surplus. 

(a)  Bonds  canceled  out  of  surplus. 

(&)  Revenue  appropriations  for  perma- 
nent   improvements    and    invest- 
ments less  capital  depreciation  and 
loss. 
Net  capital  surplus. 


88  UNIFORM    MUNICIPAL    ACCOUNTING. 

Another  class  of  assets  and  liabilities,  as  well  as  income  and  expense  items,  should  be 
separately  accounted  for,  namely,  the  trust  estates  placed  in  the  hands  of  municipalities 
for  specific  uses. 

Having  such  a  general  classification  of  administrative  ideas  in  mind — having  before  us 
the  several  administrative  problems  concerning  which  we  must  think  in  establishing 
control  over  public  enterprise — it  has  been  the  aim  of  the  committee  of  the  National  Munici- 
pal League,  of  which  your  chairman  and  your  secretary  are  members,  to  present  such  a 
nomenclature  and  terminology  as  will  give  common  symbols  of  expression,  and,  with  these, 
to  present  such  definitions  of  the  ideas  thus  symbolized  as  will  furnish  a  common  basis  for 
discussion  of  questions  concerning  which  each  accounting  officer  in  his  own  city,  the  Census 
Bureau  in  its  work,  the  writer  on  public  finance,  and  the  public  accountant  have  to  deal. 

Doctor  CLEVELAND.  Using  this  as  a  basis  for  discussion  of  nomen- 
clature, Mr.  Chairman,  I  do  not  intend  to  do  more  than  call  atten- 
tion to  the  fact  that  in  our  report  we  have  put  this  classification 
in  the  form  of  a  tentative  draft  merely  for  the  purpose  of  submis- 
sion and  criticism.  Using  this  tentative  basis  of  classification,  we 
have  in  our  report  on  nomenclature  and  terminology  attempted 
to  define  these  different  administrative  ideas,  and  to  select  terms 
which  will  serve  as  a  common  language  for  discussion.  This,  I 
hope,  may  be  brought  before  you  in  a  much  better  way  than  could 
be  represented  here  by  a  reading  of  definitions  formulated  by  the 
committee.  I  hope  that,  as  soon  as  we  may  come  to  some  agree- 
ment among  several  committees,  we  may  send  each  of  you  a  copy 
of  the  report,  and  that  you  may  note  on  those  copies  your  sugges- 
tions, or  give  us  a  memorandum  by  way  of  criticism. 

There  are  some  questions,  however,  that  I  wish  to  raise  here, 
because  there  seem  to  be  some  unsettled  points  before  us.  Turn- 
ing to  the  Census  report,  one  of  the  terms  that  I  would  bring  to  your 
attention  is  the  word  " sanitation,"  It  seems  to  me  that  the  word 
" sanitation"  is  a  term  most  commonly  used  with  reference  to 
subjects  of  interest  to  a  health  department,  or  to  the  physician 
in  his  work.  What  the  Census  Bureau  has  in  mind  is  sewers  and 
garbage  removal.  It  has  nothing  to  do  with  the  disinfecting  of 
old  clothes  or  medical  combat  with  microbes.  It  seems  to  me 
unfortunate  to  bring  in  a  word,  primarily  appropriated  by  another 
department  of  science  and  municipal  activity,  to  represent  this 
class  of  expenditures.  Not  that  the  classification  is  not  all  right, 
but  it  seems  to  me  that  it  is  somewhat  unfortunate  to  adopt  a 
word  that  may  lead  to  confusion. 

Another  suggestion  with  reference  to  Census  work  (and  I  would 
like  to  be  corrected  if  I  am  wrong  in  the  statement  as  to  facts)  is 
this:  Should  we  include  pensions  in  the  statement  of  expenses  of 
the  administration  of  a  department?  Am  I  right,  Mr.  Chairman, 
in  saying  that  they  are  included? 

The  CHAIRMAN.  Yes,  sir. 


UNIFOKM    MUNICIPAL    ACCOUNTING.  89 

Doctor  CLEVELAND.  My  reason  for  the  objection  is  this:  We 
want  to  get  at  the  cost  of  operation.  We  may  have  pensioners 
galore  on  our  pay  list,  but  it  does  not  tell  us  anything  with  refer- 
ence to  the  operation  of  a  department.  They  are  out  of  service 
and  it  is  therefore  confusing  when  we  bring  in  a  pay  roll  that  does 
not  belong  to  a  department  and  set  this  up  as  a  part  of  the  cost 
of  operation.  The  head  of  the  department  is  in  no  way  to  be  held 
responsible  for  the  pensioner.  I  would  suggest,  therefore,  that 
pensions  be  left  out  of  the  administrative  category  of  expenses 
when  seeking  to  compare  one  department  with  another. 

I  will  not  refer  further  to  the  Census  report  at  this  time,  because 
I  hope  to  be  indulged  a  little  this  evening  along  with  Mr.  Maclnnes; 
but  there  is  a  matter  before  us  which  has  to  do  with  terminology, 
and  which  comes  fairly  within  my  field,  as  introduced  by  Mr.  Chase 
in  his  outline  of  revenue  and  expenses  of  municipal  industries. 
It  seems  to  me  that  "  administration "  ought  to  go  in  as  a  specific 
classification  under  "  expenses,"  as  one  of  the  main  captions.  We 
would  then  have  (1)  expenses  of  administration,  (2)  expenses  of 
manufacturing,  (3)  expenses  of  distribution,  and  (4)  other  operat- 
ing expenses.  I  suppose  that  is  what  Mr.  Chase  meant,  to  have 
" administration"  in  his  general  head  "general  expenses;"  but  it 
seems  to  me  that  we  should  have  it  specifically  set  out  for  purposes 
of  comparison. 

Mr.  CHASE.  That  would  certainly  come  in  in  a  special  sched- 
ule— general  expenses  of  administration.  I  think  it  is  important 
to  have  a  single  classification  for  administration;  that  is  one  of 
the  things  we  want  to  look  out  for. 

Doctor  CLEVELAND.  Looking  upon  the  operation  account  as  one 
which  has  to  do  with  administrative  activities,  it  occurs  to  me  that 
we  should  take  up  there  some  of  the  items  which  Mr.  Chase  has 
excluded  for  the  reason  that  they  are  part  of  the  cost  of  operation — 
for  example,  repairs  and  replacements.  A  plant  in  one  city  is  run- 
ning without  any  repairs  and  another  plant  is  being  kept  up.  It 
is  a  part  of  the  business  of  those  responsible  for  running  a  plant 
to  provide  against  its  being  wrorn  out.  If  the  one  manager  in  the 
direct  expenses  of  operation  provides  for  repairs  and  replacements, 
and  another  does  not,  this  should  not  be  shown  as  a  point  in  favor 
of  the  manager  who  does  not  allow  his  plant  to  become  depreciated. 
Depreciation  is  the  difference  between  the  amount  they  should 
have  spent  and  the  amount  they  did  spend  in  keeping  a  plant  in 
repair.  It  is  what  they  did  not  spend,  but  should  have  spent  out 
of  the  current  revenue,  and  therefore  should  be  charged  against  it. 
If  we  are  going  to  get  down  to  earnings  on  a  net  basis,  we  should 
put  a  depreciation  reserve  in  our  operating  expenses  as  a  means 


90  UNIFOKM    MUNICIPAL   ACCOUNTING. 

of  getting  a  comparable  net  income;  otherwise  the  man  who  is  run- 
ning his  business  the  most  poorly  will  come  out  with  a  larger  net 
earning.  If  we  are  going  to  make  provision  for  furnishing  to  the 
world  comparative  statistics  and  exact  administrative  expendi- 
tures, we  want  to  have  it  known  who  are  making  provision  for 
repairs  and  who  are  not. 

The  classification  indicated  in  Mr.  Chase's  schedule  as  "  guaran- 
tee" is  the  provision  to  be  made  for  income  uncollectible;  in  other 
words,  the  "  guarantee "  is  for  water  rates  uncollectible  and  meter 
rates  and  contracts  with  houses  for  power,  etc.  Now,  are  not 
these  uncollectible  items  to  be  considered  a  deduction  from  income? 
Should  not  these  go  in  as  charges  against  revenue  instead  of  being 
taken  out  of  operating  accounts?  Should  riot  the  balance  sheet 
item  " reserve  for  bad  debts"  find  its  counter  entry  as  a  deduction 
from  income  in  operation  accounts? 

Mr.  CHASE.  "  Expenses,"  as  we  define  it,  is  here  divided  into 
two  parts:  one,  B,  "expenses,"  and  one,  C,  " charges  on  account  of 
revenue."  The  net  profits,  therefore,  is  income  less  expenses  for 
revenue  charges.  The  one  point  is  whether  this  definition  shall 
be  retained  or  whether  another  definition  shall  be  selected. 

Doctor  CLEVELAND.  I  am  very  glad  Mr.  Chase  raised  the  point  here, 
because  there  seems  a  vital  weakness  in  the  statement  from  the 
point  of  view  of  comparable  statistics.  It  is  better  to  put  that  as 
a  deduction  from  the  income  from  operation  instead  of  having  it 
set  up  here  as  among  the  property  charges. 

Mr.  MAC!NNES.  It  was  the  " guarantee"  or  reserve  to  provide 
for  shrinkage  in  assets,  for  the  shrinkage  of  current  assets — that 
is  to  say,  bad  debts. 

Doctor  CLEVELAND.  That  is,  if  it  is  in  the  nature  of  bad  revenue 
receivable,  it  is  usually  in  the  nature  of  claims  against  persons 
who  have  entered  into  contracts  for  gas  or  water  to  be  supplied, 
and  the  amount  has  been  taken  into  revenue.  Being  a  bad  account, 
it  should  be  taken  out  at  the  end  of  the  year  to  get  a  statement  of 
net  revenue  earned. 

Mr.  CHAPMAN.  In  other  words,  you  would  mix  up  a  speculative 
charge  with  an  operating  expense;  you  would  include  a  fairy  tale 
with  a  fact.  The  provision  making  the  charges  against  revenue 
for  guarantee  against  shrinkage  of  current  assets,  or,  in  other  words, 
provision  to  meet  probable  bad  debts,  is  entirely  a  speculative  expe- 
dient, and  therefore  should  not  rank  or  be  included  among  oper- 
ating expenses  per  se. 

Doctor  CLEVELAND.  Yes;  it  is  a  fact  that  your  expenses  were  so 
much.  The  purpose  is  not  to  include  a  fairy  tale  in  your  expenses, 
but  to  take  a  fairy  tale  out  of  your  statement  of  revenue  earned. 

Mr.  MAC!NNES.  It  is  purely  an  estimated  amount   to  cover  bad 


UNIFORM    MUNICIPAL   ACCOUNTING.  91 

debts  and  is  not  in  the  nature  of  an  expense  actually  incurred,  and 
therefore  should  not  rank  as  an  expense  charge. 

Doctor  CLEVELAND.  It  should  not  be  treated  as  an  expense,  but 
as  a  deduction  from  income.  It  is  an  estimated  amount  to  cover 
bad  debts,  some  of  which  may  be  for  a  period  preceding,  perhaps, 
and  some  for  the  period  we  are  dealing  with;  but  if  each  year  a 
proper  reserve  were  deducted  for  bad  debts,  the  income  statement 
would  not  be  padded  with  bad  assets. 

Mr.  CHAPMAN.  Now,  the  first  is  predicated  on  transactions  and 
the  last  is  based  on  an  estimate,  and  in  this  way  you  will  tend  to 
mix  up  transactions  with  estimates. 

Doctor  CLEVELAND.  I  will  accept  Mr.  Chapman's  criticism,  pro- 
viding that  the  outline  is  on  a  cash  basis;  that  is,  simply  taking 
the  net  receipts  or  revenue  that  you  collect  and  not  what  you  earn 
during  the  year.  But,  on  the  other  hand,  if  you  are  setting  up  an 
account  as  a  railroad  sets  up  the  accrued  amount  of  revenue,  charg- 
ing against  such  the  expenses  incurred,  then  it  should  be  deducted 
from  the  income.  If  we  are  going  to  get  on  a  cash  basis,  you  can 
not  make  that  comparison.  Then  you  can  come  in  and  say  we 
will  have  nothing  but  what  you  actually  received,  whether  it  be 
income  for  the  year  before  or  for  the  year  after. 

Mr.  CHAPMAN.    Section   B  of   expenses    are   registered    charges; 
whether  they  are  liquidated  or  not,  they  are  absolutely  registered 
transactions  representing  the  charges  that  appear  on  the  books; 
while  income,  whether  realized  or  not,  also  consists  of  fully  registered 
transactions.     The  " guarantee/'  or  the  reserve  for  depreciation,  or 
the   depreciation  reserve,   for   shrinkage,   under  maintenance,    are 
entirely  estimates.     They  are  speculative  amounts  purely,  resorted 
to  as  matters  of  precaution,  and  are  not  the  fruits  of  any  righteous 
transactions  between  the  city  and  its  customers. 
Doctor  CLEVELAND.  I  did  not  say  that. 
Mr.  CHAPMAN.  It  means  the  same  thing. 
Doctor  CLEVELAND.  I  did  not  mean  to  say- 
Mr.  CHAPMAN.  But  you  have  the  accrual  basis,  and  therefore  if  you 
are  looking  upon  this  as  a  comparative  summary- 
Doctor  CLEVELAND.  If  you  are  talking  from  a  basis  of  accrual,  by 
your  method  you  will  not  arrive  at  income  accrued  during  the  year. 
Suppose  you  let  a  contract  to  me  for  $10,000,  and  within  the  year  I 
become  insolvent;  what  do  you  do?     You  write  it  down,  and  you 
should  write  your  income  down,  in  order  to  get  at  your  income  for  the 
year. 

•    Mr  .'CHAPMAN.  Then  the  "  guarantee"  is  not  simply  the  writing 
down  of  what  is  lost;  it  is  the  writing  down  of  what  may  be  lost. 

Doctor  CLEVELAND.  It  is  the  same  thing  on  an  accrual  basis  as 
would  be  the  writing  down  actual  losses  on  a  cash  basis.  You  find 


92  UNIFORM    MUNICIPAL    ACCOUNTING. 

your  average  loss  is  2  per  cent  bad  debts.  One  year  it  may  be  one, 
another  three,  another  four.  But  you  write  off  the  actual  loss  from 
that  reserve,  and  you  have  an  income  which  is  actual — something  based 
on  the  history;  you  have  your  own  experience  as  a  basis  for  getting 
at  the  income  for  the  year.  It  is  the  same  problem  that  you  have  in 
depreciation,  except  that  you  depreciate  your  income  instead  of  your 
profit.  It  is  a  thing  which  is  dependent  upon  actuarial  estimates, 
your  balanced  calculations,  your  farsightedness.  It  is  nothing  more 
or  less  than  doing  for  income  what  you  say  is  right  to  do  with  assets. 

The  CHAIRMAN.  I  think,  gentlemen,  we  had  better  confine  ourselves 
to  the  paper.  We  would  like  to  hear  from  Mr.  Chase  later. 

Doctor  CLEVELAND.  One  other  question,  and  that  is  whether  you 
should  put  damages  and  extraordinary  legal  expenses  into  your  sum- 
mary of  expense  of  operation  under  "  administration " — in  other 
words,  set  up  a  reserve  for  them.  The  question  is  raised  for  this  rea- 
son :  that  damages  and  extraordinary  legal  costs  usually  grow  out  of 
the  character  of  your  administration.  If  you  have  bad  administra- 
tion in  digging  a  trench  for  repair  of  mains,  the  earth  may  fall  in  on 
the  men.  If  the  administration  is  inefficient,  your  machinery  may 
break  down,  being  out  of  repair,  and  an  accident  will  follow,  causing 
personal  damage.  In  other  words,  what  is  called  here  "  extraordinary 
legal  expenses"  are  incurred  largely  on  account  of  bad  administration. 
The  purpose  of  the  administrative  account  is  to  locate  responsibility 
and  to  do  this  from  the  history  of  the  business.  Would  we  establish 
an  average  cost?  If  so,  we  must  determine  this  from  experience. 
Should  we  not  set  up  a  reserve  which  will  cover  the  average  of  these 
costs  and  charge  that  as  an  expense  against  the  income  of  the  year  as 
a  means  of  establishing  the  net  revenue  ?  Then  when  we  pay  damages 
these  might  be  charged  against  the  income  reserve;  thus,  instead  of 
taking  a  lump  sum  of  $10,000,  $50,000,  or  $100,000  out  of  your  cur- 
rent revenue  returns,  we  w^ould  take  out  each  year  an  average  cost  to 
show  the  comparative  results  of  administration.  If  the  administra- 
tion is  bad,  resulting  in  large  extraordinary  legal  expenses,  why  should 
we  not  put  up  a  larger  reserve  ?  I  am  simply  raising  the  question.  I 
do  not  mean  to  say  we  should  do  so.  I  raise  the  question,  having  in 
mind  the  purpose  of  our  comparative  statistics  reflecting  cost  of 
administration.  The  other  charges  in  Class  C,  presented  by  Mr.  Chase, 
are  in  the  nature  of  expenses  with  which  the  administration  has  little 
or  nothing  to  do  and  for  which  it  may  not  be  held  responsible.  We 
must  pay  our  taxes;  franchise  charges  .must  be  met;  insurance  must 
be  paid  or  else  the  risk  carried.  There  are  various  charges  in  the 
nature  of  property  expenses,  and  the  expenses  of  procuring  capital  like 
interest,  which  do  not  reflect  on  the  administration  at  all.  These 
reflect  the  style  of  the  organization;  the  kind  of  equipment  provided; 
the  manner  in  which  the  enterprise  is  capitalized.  If  we  are  to  reflect 


UNIFORM    MUNICIPAL   ACCOUNTING.  93 

economy,  ability,  and  efficiency  in  Class  B  and  the  overriding  charges 
for  which  the  one  in  charge  of  the  enterprise  is  not  responsible  in  Class 
C,  adjustments  in  the  classification  should  be  made  to  this  end. 
Taxes  and  insurance,  and  items  of  that  kind,  are  property  charges. 
They  have  nothing  to  do  with  the  operation  and  properly  belong  to 
Class  C. 

Another  matter  of  comment,  occurs  to  me,  in  looking  over  this  out- 
line. Mr.  Chase  has  made  no  provision  for  surplus  (or  profit  and  loss) 
accounts.  He  has  provided  for  distribution  from  surplus  in  the  form 
of  dividend,  sinking  fund,  etc.,  but  he  hasn't  any  accounts  showing 
surplus.  If  at  the  end  of  the  year  the  enterprise  shows  a  net  income, 
after  deducting  charges,  what  are  you  going  to  do  with  the  net 
income  ?  And  what  provision  is  made  for  losses  on  account  of  fire  or 
flood,  on  account  of  strikes  and  riots,  on  account  of  explosions  or  acci- 
dents to  buildings,  on  account  of  other  losses?  Furthermoie,  there 
is  no  provision  made  here  for  taking  account  of  the  various  forms  of 
extraordinary  returns,  as  from  the  sale  of  a  piece  of  property,  over 
and  above  what  is  paid  for  it,  or  on  account  of  the  collection  of  a  debt 
that  has  been  written  off.  There  is  no  provision  made  in  the  outline 
for  any  of  these  transactions  or  to  show  the  financial  result  of  this  part 
of  the  business.  There  should  be  some  classification  in  which  you 
could  carry  this  sort  of  extraordinary  financial  returns  and  deductions, 
call  the  statement  one  of  surplus,  or  what  not.  We  should  call  this 
last  classification,  not  charges  on  account  of  capital,  for  they  are  not 
charges  on  account  of  capital,  but  distribution  from  surplus.  In 
other  words,  this  is  the  source  from  which  the  distribution  comes  and 
not  from  capital. 

The  CHAIRMAN.  Is  the  committee  ready  to  report  ?  Its  report  was 
to  be  made  immediately  after  Doctor  Cleveland's  paper. 

Mr.  BECK.  Mr.  Chairman  and  gentlemen,  your  committee,  which  has 
had  under  consideration  a  paper  submitted  by  Doctor  Cleveland,  feel 
that  it  would  be  unbecoming  in  them,  in  view  of  the  time  and  study 
which  Doctor  Cleveland  has  given  the  subject,  to  attempt  at  this  time 
to  criticise  the  report  in  respect  to  the  terminology  and  definitions 
given  therein;  or,  on  the  other  hand,  to  recommend  to  the  officers  of 
the  different  states,  or  to  the  Census  Bureau,  the  adoption  of  the  terms 
which  he  has  set  forth  in  his  report.  But  we  do  feel  that  it  would  be 
of  interest  to  the  members  of  this  conference,  and  undoubtedly  to 
other  municipal  officers  and  students  of  municipal  finance,  if  it  can  be 
done,  that  the  Census  Bureau  should  have  a  copy  of  this  report 
printed,  and  the  various  forms  of  classification  laid  down  therein,  that 
the  same  might  be  distributed  in  connection  with  the  official  proceed- 
ings of  this  conference.  Do  you  suppose  that  can  be  done,  Mr. 
Chairman? 


94  UNIFORM    MUNICIPAL   ACCOUNTING. 

The  CHAIRMAN.  I  am  not  sure  of  it,  because  there  are  some  legal 
points  in  reference  thereto.  The  Comptroller  of  the  Treasury  will 
pass  on  that. 

Mr.  BECK.  The  committee  thinks  if  it  can  be  done,  it  will  be  valu- 
able, because  otherwise  proper  study  might  not  be  given  to  the  paper, 
and  such  criticisms  may  then  suggest  themselves  to  individual  mem- 
bers, and  be  transmitted  to  the  Bureau  for  its  consideration.  The 
committee  itself  feels  that  on  this  matter  of  terminology  we  must  get 
down  to  the  simplest  form  of  language  that  can  possibly  be  used  to 
define  the  various  municipal  functions  of  government,  and  that  there 
is  no  one  in  a  better  position  to  lay  down  or  to  set  up  such  a  form  as 
this  adopted  by  the  Census  Bureau.  They  have  their  agents  scat- 
tered all  over  the  country,  and  have  made  a  careful  study  of  it.  They 
know  the  nature  of  the  offices  that  exist  in  each  municipality  and 
they  are  in  a  better  position  to  decide  on  forms  and  expressions  than 
this  body,  because  this  is  a  subject  that  requires  great  thought 
and  careful  study.  It  seems  to  me  the  terminology  that  is  already 
used  in  the  preparation  of  the  census  statistics  is,  as  a  whole,  very 
complete.  There  are  here  and  there  terms  which,  to  my  mind  and 
from  my  experience,  might  be  a  little  simpler.  The  Census  Bureau, 
in  the  expenditures  for  construction  or  for  the  further  extension  of 
the  addition  to  the  assets  of  a  municipality,  uses  the  expression  "  capi- 
tal outlays." 

The  CHAIRMAN.  Outlay,  instead  of  outlays. 

Mr.  BECK.  It  seems  to  me  there  are  many  who  might  not  be 
familiar  with  that  expression  or  know  what  it  means.  It  is  custom- 
ary for  our  department,  in  the  preparation  of  our  reports,  to  use 
another  term,  which  seems  to  us  more  explicit  and  possibly  a  little 
simpler,  and  that  is  the  word  "  improvement."  You  might  couple 
with  that  the  word  " extension,"  or  the  word  " construction;"  but 
I  might  say  that,  with  all  the  advice  our  department  has  received 
from  the  other  divisions  of  the  city  government,  it  has  taken  eight 
years  to  have  the  estimates  submitted  to  our  department  classified 
along  these  simple  lines.  It  seems  to  the  committee  that  a  sugges- 
tion along  this  line  might  prove  feasible,  that  the  comptroller  or  the 
other  chief  auditing  officer  who  is  charged  with  the  responsibility  of 
preparing  or  tabulating  the  budget  as  submitted  for  the  consideration 
of  the  council  might  prepare  blanks,  or  printed  forms,  upon  which 
these  various  classifications  could  be  made,  and  subdivided  under 
such  heads  as  "public  safety,"  "parks,"  "schools,"  etc.,  so  that 
when  the  estimates  are  made,  they  will  be  in  that  form;  when  the 
appropriations  are  made,  they  will  be  under  the  same  classification; 
when  the  Census  agent  comes  along,  he  will  find  there  in  the  books 
themselves  the  very  forms  and  peculiar  phraseology  which  has  been 
adopted  by  the  Census  Bureau.  It  seems  to  me  a  simple  solution 


UNIFORM    MUNICIPAL    ACCOUNTING.  95 

of  the  matter,  and  if  the  Census  Bureau  adopt  a  schedule  the  termi- 
nology of  which  shall  be  simple  and  explicit  and  notify  the  different 
fiscal  officers  of  municipalities  throughout  the  country,  a  long  step 
in  the  right  direction  will  be  taken. 

The  CHAIRMAN.  This  strikes  me,  gentlemen,  as  something  emi- 
nently worthy  to  be  considered.  Is  there  any  further  discussion  of 
Doctor  Cleveland's  paper?  That  brings  up  again  the  discussion  of 
the  paper  of  Mr.  Chase. 

Doctor  HARTWELL.  Doctor  Cleveland  refers  to  the  proper  way  of 
classifying  pensions.  We  have  no  general  system  of  pensions  for 
municipal  civil  servants  in  this  country,  such  as  is  generally  common 
in  Europe.  The  cost  of  pensions  would  seem  to  be  an  administrative 
charge,  particularly  in  these  municipal  schemes  of  superannuation 
and  retirement,  in  which  the  pension  and  retiring  allowance  is  viewed 
as  a  deferred  payment  of  salary. 

The  CHAIRMAN.  Is  there  any  further  discussion?  I  see  Auditor 
McCardy  of  the  Post  Office  Department  here,  and  would  be  glad  to 
have  a  few  words  from  him,  if  he  will  consent. 

Mr.  McCARDY.  Mr.  Chairman  and  gentlemen  of  the  convention, 
having  done  time  as  a  city  official  for  a  good  many  years,  I  would 
like,  in  coining  to  this  meeting  of  accounting  officers  of  cities,  to  say 
that  it  is  always  a  pleasure  to  look  into  the  faces  of  the  men  who  do 
the  hard  work,  furnish  the  brains,  and  get  little  pay  and  a  good  many 
kicks.  I  might  say  that  if  you  have  any  time  to  spare  while  you  are 
here,  I  should  be  delighted  to  have  you  call  at  the  Post  Office  Depart- 
ment, as  there  are  some  things  there  that  might  interest  you.  Where 
people  of  all  types  have  bought  money  orders,  and  those  money 
orders  average  $7.50  each,  and  have  to  be  handled  at  least  six  times 
in  accounting  and  checking  up  the  issuing  and  paying  of  them,  con- 
siderable work  is  required.  It.  requires  in  our  office  about  300  men 
to  handle  the  money  orders.  I  think  you  might  like  to  drop  in  to 
see  how  some  of  your  business  is  done. 

A  few  days  ago  a  gentleman  in  this  city,  while  talking  to  me  about 
municipal  matters,  asked  the  question,  "  What  is  the  most  interesting 
question  that  concerns  the  taxpayer — the  most  interesting  question 
from  the  point  of  view  of  accounting  officials?''  Well,  that  is  a  big 
question.  My  reply  was  that  everyone  would  like  to  know  whether 
the  dollar  that  he  pays  to  the  tax  collector  or  treasurer  was  applied 
to  its  proper  purpose.  My  observation  has  been  that  the  average 
taxpayer  in  many  cities  is  not  fairly  treated  in  that  respect,  and  in 
the  management  of  national  affairs  as  well  as  in  cities  there  is  a 
diversion  of  funds.  There  are  some  stringent  provisions  against  it 
in  some  cities,  and  rightly  so;  but  right  under  the  noses  of  some  city 
officials  money  is  diverted,  just  the  same. 
27311—06 7 


96  UNIFORM    MUNICIPAL   ACCOUNTING. 

There  are  cities  in  the  United  States  where  money  is  diverted,  and 
I  know  it  is.  A  great  deal  has  been  said  as  to  the  form  of  blanks. 
I  am  of  the  opinion  that  when  you  tie  yourself  down  to  certain  blanks 
and  forms,  necessarily  you  do  well.  You  will  get  credit  for  it.  But 
in  the  levying  of  taxes  and  in  the  preparing  of  the  budget,  if  you 
arrange  forms  so  as  to  show  definitely  how  much  is  to  be  assigned 
by  percentages  to  each  fund,  and  follow  that  same  percentage  in 
the  distribution  of  the  taxes  when  paid  into  the  treasury,  there  will 
be  no  diversion  of  fund.  What  do  I  mean  by  that?  Take,  for 
instance,  a  city  where  there  are  forty  or  fifty  different  operating 
funds,  requiring  appropriations  for  fire,  police,  hospital,  poor  funds, 
etc.,  with  various  percentages  placed  on  the  tax  roll  for  the  benefit 
of  each  one.  Now,  let  there  be  a  half  million  paid  in  and  instead  of 
giving  round  sums  to  this,  that,  or  the  other  fund,  let  it  be  distributed 
according  to  the  percentages,  and  there  will  be  no  question  as  to 
the  diversion  of  the  fund. 

Another  point — the  form  for  paying  out  the  money:  I  do  not 
believe  that  any  treasurer  or  any  auditor  ought  to  be  permitted  to 
draw  his  own  check  as  treasurer  on  public  funds.  I  think  that 
this  sometimes  leads  to  trouble,  to  put  it  mildly.  I  know  a  city 
where  the  following  plan  is  employed,  and  I  believe  it  is  a  good  one: 
A  city  clerk,  after  a  bill  has  been  allowed  by  the  proper  authorities, 
will  draw  a  warrant  on  the  treasurer  to  pay  that  bill.  That  warrant 
will  be  countersigned  by  the  comptroller.  The  creditor,  in  due 
course,  receives  the  warrant  and  presents  it  to  the  treasurer  for 
payment.  In  some  cities  the  treasurer  would  take  that  warrant 
in  and  draw  his  check.  This  is  not  the  best  plan.  The  best  plan, 
as  in  the  city  I  have  in  mind,  is  for  the  city  treasurer  to  stamp  that 
warrant  and  convert  it  into  a  check  on  a  bank.  Then  there  can 
be  no  collusion.  Every  time  you  copy  a  figure  you  multiply  the 
possibility  of  error.  Then  this  original  warrant  is  the  best  receipt 
for  the  city  on  its  face  for  the  purpose  for  which  it  is  drawn.  The 
holder  of  that  warrant  uses  it,  and  in  time  it  com.es  back  to  the 
treasurer  and  in  due  course  the  bank  book  is  balanced,  and  he  in 
turn  returns  it  to  the  comptroller  and  they  take  that  form  as  a  part 
of  the  original  voucher,  so  every  transaction  is  a  check  for  their 
own  warrant.  Now,  another  form — 

Mr.  REX.  Just  a  moment.  Would  you  recommend  its  use  in  all 
parts  of  the  country?  In  some  cities  they  pay  warrants  on  the 
treasurer  under  a  certain  amount  in  cash. 

Mr.  McCARDY.  No;  I  would  not  let  the  treasurer  pay  a  dime  over 
the  counter.  Another  thing;  I  do  not  believe  it  is  a  good  plan  to  let 
the  treasurer  of  a  city  select  his  own  banks.  There  is  too  much 
favoritism  under  that  form  of  depositing  money.  No  city,  having 
bonds  outstanding,  that  allows  coupons  to  be  paid  over  the  counter 


UNIFORM    MUNICIPAL   ACCOUNTING.  97 

into  the  hands  of  the  holder  upon  presentation — no  city  that  allows 
such  a  proceeding — can  tell,  at  the  close  of  business  on  a  given  day, 
from  the  accounting  officer's  books  how  much  money  is  in  the 
treasury,  because  there  is  a  disbursement  that  the  accounting  officer 
knows  nothing  about.  When  you  ask  a  city  official  how  he  pays 
his  coupons,  and  if  he  pays  in  cash,  you  know  at  once  that  that 
city — that  city's  accounting  officer — does  not  know  at  the  close  of 
business  day  by  day  how  much  money  is  in  the  treasury.  Thereby 
two  ways  for  trouble  are  opened. 

Now,  a  good  deal  has  been  said  here.  I  have  been  listening  to 
what  you  gentlemen  have  said  about  your  manner  of  doing  business 
in  various  cities,  and  I  learn  that  you  propose  to  form  a  municipal 
public  accounting  officers'  association.  I  think  you  would  be  wise 
to  do  so,  for  such  meetings  as  this  are  certainly  beneficial — to  com- 
pare notes,  like  our  friend  who  is  sitting  over  here,  simply  asking 
questions,  some  of  them  hard  to  answer;  but  it  brings  out  the  best 
thoughts.  These  forms  that  you  speak  of — and  somebody  over 
there  touched  the  right  spot — these  forms,  followed  up,  are  educa- 
tional to  the  ever  changing  city  official.  You  may  think  you  are 
a  pretty  good  official  and  that  they  can  not  get  along  without  you ; 
but  you  may  wake  up  some  morning  after  election  and  change  your 
idea  about  that.  I  have  had  that  experience,  and  know  all  about  it. 
But  let  a  uniform  plan  of  accounting  be  mapped  out  in  the  books 
of  the  city,  and  it  will  be  well  for  the  man  who  succeeds  you,  and  it 
will  be  well  for  the  taxpayer,  as  it  will  insure  publicity.  It  is  a  good 
idea  to  take  the  public  into  your  confidence.  It  is  his  business — it  is 
the  taxpayer's  business — and  the  more  clearly  you  can  explain  it  to 
him  the  better  satisfied  will  he  be.  Let  the  newspapers  have  infor- 
mation as  to  what  is  going  on. 

Let  me,  in  conclusion,  reiterate  what  I  said  about  your  visiting 
our  great  office,  where  we  audit  accounts  to  the  amount  of  about  four 
million  dollars  a  day.  Come  in  and  see  how  we  do  some  of  it.  You 
can  get  a  bird's-eye  view  of  it,  and  I  think  it  will  be  very  interesting 
to  you. 

The  CHAIRMAN.  Is  there  any  other  discussion  of  the  papers  this 
afternoon  ? 

Mr.  MAC!NNES.  Mr.  Chairman,  if  there  is  not  anything  at  the 
present  moment  of  prime  importance  to  come  before  the  conference, 
I  would  suggest,  inasmuch  as  the  subject  of  the  preparation  of 
balance  sheets  and  the  preparation  of  revenue  and  expense  accounts 
have  been  set  apart  as  a  special  order  of  business  for  to-night's 
session,  that  we  adjourn,  to  reconvene  at  half -past  7.  It  is  now 
about  5  o'clock;  it  will  give  us  two  and  a  half  hours,  and  we  can 
reconvene  at  half-past  7.  This  time  will  be  required,  I  believe,  to 


98  UNIFORM    MUNICIPAL    ACCOUNTING. 

give  something  of  a  general  discussion.  It  will  come  before  us  then. 
I  offer  this  for  two  reasons.  The  committee  that  you  appointed  a 
short  time  ago  to  review  the  schedules  submitted  by  Mr.  Chase 
wish  to  have  an  opportunity  to  give  them  ample  consideration. 
I  move  that  we  do  now  adjourn,  to  reconvene  at  7.30. 

The  CHAIRMAN.  Is  there  any  objection?  The  motion  is  made  and 
seconded  to  adjourn  and  to  reconvene  at  7.30.  All  those' in  favor 
will  signify  the  same  by  saying  "  Aye; "  contrary,  " No."  The  motion 
prevails,  and  we  stand  adjourned. 

FIFTH  SESSION,  WEDNESDAY  EVENING,  FEBRUARY  14. 

The  conference  was  called  to  order  at  7.50  p.  m.  by  the  chairman. 

The  CHAIRMAN.  We  will  begin  the  business  of  the  evening  with  the 
paper  by  Mr.  Maclnnes,  and  immediately  after  the  paper  we  will 
have  the  report  of  the  committee. 

Mr.  MAC!NNES.  Mr.  Chairman  and  gentlemen,  the  special  order  of 
business  assigned  for  to-night's  proceedings  is  the  balance  sheet  and 
how  it  shall  be  arranged,  and  also  the  consideration  of  the  practical 
value  of  revenue  and  expense  accounts.  At  the  conference  held 
under  the  auspices  of  the  Census  Bureau  in  this  city  two  years  ago 
last  November  I  read  a  paper  on  the  municipal  balance  sheet,  which 
evoked  sufficient  discussion,  I  presume  largely  because  of  the  princi- 
ples advocated  therein,  to  justify  the  belief  that  a  sequel  to  that 
paper  should  follow  at  this  the  second  conference  held  under  the  aus- 
pices of  the  Census  Bureau;  and  believing  that  the  subject  should 
be  sufficiently  amplified  to  bring  forth  a  discussion  somewhat  com- 
mensurate with  the  importance  of  the  subject,  and  for  the  purpose 
of  giving  my  views  in  regard  to  the  principles  upon  which  a  munici- 
pal balance  sheet  must  be  founded — I  say  for  the  purpose  of  giving 
these  views  the  greatest  publicity  among  those  competent  to  deal 
with  the  subject,  Mr.  Chairman,  I  take  the  opportunity  which  the 
kindness  of  the  Census  Bureau  and  your  courtesy  has  afforded  of 
offering  this  contribution  as  a  sequel  to  my  former  paper. 

(Mr.  Maclnnes's  paper  follows.) 

THE    MUNICIPAL    BALANCE    SHEET:      THE    UNDERLYING    PRINCIPLES    OF    ACCOUNTING    WHICH 
GOVERN    ITS    ELEMENTS    AND   THE    EXPRESSION    THEREOF. 

The  first  financial  statements  of  municipalities,  prepared  in  accordance  with  the  classi- 
fication of  accounts  adopted  by  the  National  Municipal  League  (and  which  classification  is 
designated  as  the  "municipal  programme")  grouped  the  receipts  and  payments  in  opposi- 
tion to  each  other  in  the  order  of  prescribed  titles  and  subtitles,  the  nomenclature  and 
sequence  of  which  were  identically  alike  on  both  sides  of  the  statements.  The  first  or  con- 
trolling statement  dealt  with  a  broad  classification,  and  the  succeeding  statements  devel- 
oped subtitles  by  progressive  stages  of  amplification.  Throughout  the  entire  series  of 
primary  and  supporting  statements  not  only  were  the  receipts  and  payments  opposed  and 
distinguished  by  the  same  titles  and  in  the  same  order,  but  each  item  of  receipt  and  of  pay- 
ment was  further  either  divided  between  or  allocated  under  one  of  the  two  all-pervading 
alternatives  distinguished  by  the  terms  " ordinary"  and  "extraordinary." 


UNIFORM    MUNICIPAL   ACCOUNTING.  99 

That  feature  of  the  theme  of  expression  wherein  the  receipts  and  payments  were  recited 
with  like  titles  and  in  like  order  is  being  gradually  abandoned  by  its  original  sponsors  and 
advocates.  Traces  still  linger  where  a  semblance  of  justification  remains,  as  in  the  case  of 
opposing  collection  costs  to  receipts,  or  departmental  receipts  against  departmental  expen- 
ditures bearing  but  an  accidental,  or,  at  greatest,  remote  relationship  to  such  receipts,  but 
the  necessity  of  giving  expression  to  other  distinctions  of  more  vital  significance  and  requir- 
ing a  radically  different  arrangement  and  nomenclature  is  so  certain  to  supplant  the  said 
arrangement  peculiar  to  the  "municipal  programme,"  that  the  only  menace  it  offers  to 
progressive  accounting  is  the  time  lost  in  pursuing  a  path  that  leads  nowhere,  and  must  in 
consequence  be  finally  abandoned. 

The  other  feature  of  the  theme,  however,  which  seeks  to  differentiate  between  "ordinary" 
and  "extraordinary,"  is  one  which,  although  it  is  destined  ultimately  to  die  the  death,  will, 
nevertheless,  die  hard  and  occasion  a  correspondingly  greater  obstruction  in  the  path  of 
logical  accounting.  It  too  is  a  road  that  leads  nowhere,  but  it  is  a  long  and  alluring  one, 
and  the  loss  of  time  spent  on  its  winding  course  is  not  so  soon  to  J>e  realized. 

One  of  the  purposes  of  this  paper  is  to  show  that  there  is  no  necessity  or  reason  for  recog- 
nizing any  such  distinction,  and  that  the  use  hi  municipal  statements  of  such  terms  as 
"  ordinary  "  and  "  extraordinary,"  or  of  the  later  and  more  popular  substitutes, "  capital "  and 
"revenue,"  serves  no  real  purpose  and  that  these  terms  do  not  convey  any  significant 
meaning. 

When  the  terms  "ordinary"  and  "extraordinary"  were  first  exploited  as  expressing  a 
governing  differentiation  in  municipal  transactions,  they  were  totally  destitute  of  inherent 
suggestiveness  to  anyone  outside  of  the  circle  wherein  said  terms  originated.  Inquiry  as 
to  what  they  were  intended  to  convey  elicited  the  explanation  that  they  corresponded  in 
the  main  to  "capital"  and  "revenue."  Taxes,  it  was  stated,  were  ordinary  receipts,  while 
money  borrowed  on  the  city's  credit  by  sale  of  bonds  was  extraordinary.  On  the  other 
hand,  the  salaries  and  wages  of  officials,  clerks,  police,  and  street  sweepers  were  ordinary 
expenditures,  while  the  cost  of  erecting  and  equipping  public  buildings  or  paving  streets 
was  extraordinary.  In  other  words,  we  must  picture  the  operations  of  a  trading  corpora- 
tion as  if  its  going  transactions  incident  to  purchases,  sales,  and  management  were  ordi- 
nary or  revenue  activities,  while  if  it  borrows  by  issue  of  bonds  and  pledge  of  assets  to  build 
extensions  to  its  plant  or  equipment,  such  are  extraordinary  or  capital  transactions. 

But  the  so-called  "extraordinary"  transactions  are  as  frequent,  constant,  extensive,  and 
inevitable  as  the  "ordinary"  ones,  and  if  capital  and  revenue  are  intended,  why  not  say  so 
at  the  outset?  The  natural  result  is  that  the  terms  "ordinary"  and  "extraordinary  "  are 
falling  into  disuse,  and  the  terms  "capital"  and  "revenue"  are  becoming  more  popular. 
Ambiguity,  at  least,  is  now  removed,  and  the  propriety  of  the  latest  expedient  can  be  con- 
sidered in  the  light  of  day,  with  a  full  consciousness  of  what  it  stands  for. 

The  distinctions  "capital"  and  "revenue"  introduced  in  the  general  accounts  of  a  city 
by  those  adopting  this  expedient  may  be  due  to  the  fact  that  the  departmental  accounts 
and  reports  of  British  cities,  and  those  relating  to  the  public  utilities  owned  and  operated 
by  those  cities  as  municipal  industries,  are  controlled  by  a  system  of  accounts  reflecting 
capital  and  re  venue,  cast  upon  the  same  lines  as  those  of  similar  private  enterprises;  but 
the  failure  to  distinguish  between  the  genius  of  the  accounts  dealing  specifically  with  the 
separate  enterprises  of  a  municipality  (referred  to  further  on  in  this  paper)  and  the  underlying 
principles  governing  the  general  accounts  of  a  city,  probably  comes  from  the  tendency  to 
imagine  that  the  conditions  which  attach  to  the  familiar  accounts  of  the  private  corpora- 
tion bear  in  their  entirety  upon  the  accounts  of  a  city. 

A  city,  as  such,  has  neither  capital  nor  revenue,  but  consists  of  an  aggregation  of  private 
estates  with  certain  properties  possessed  in  common,  and  its  accounts  can  reflect  truth- 
fully only  the  administration  of  the  common  interest  by  authorized  payments  from  author- 
ized provision  or  letters  of  credit,  with  such  other  and  casual  income  and  expenditure  as 
are  incident  to  its  complex  activities.  All  receipts,  whether  arising  from  general  tax,  spe- 
cial assessment,  water  rates,  sale  of  bonds,  or  fees  and  fines,  alike  come  out  of  the  private 


100  UNIFOKM    MUNICIPAL   ACCOUNTING. 

estates  within  the  city,  some  at  the  outset  and  others  eventually,  and  all  payments  are 
alike  for  public  service  on  behalf  of  the  citizens,  either  for  their  personal  protection,  edu- 
cation, or  convenience,  or  for  increased  facilities  which  heighten  the  value  of-their  property 
and  the  advantages  that  they  in  consequence  enjoy. 

The  wealth  of  a  city  is  as  seen  from  the  hilltop.  It  is  the  collective  wealth  of  the  f red- 
holders  and  their  tenants.  Every  public  building,  park,  street,,.and  sewer  bias  been  paicl 
for  by  the  inhabitants,  belongs  to  them  in  common,  and  enhances  the  value  of  every  busir 
ness  and  residential  holding,  which  is  taxed  accordingly;  while  the  municipal  corporation; 
when  considered  as  a  separate  entity  and  apart-f^om  the  private  estates  within  its  terri- 
tory, is  a  penniless  nonentity.  As  its  balance  sheet,  therefore*  can  contain  no  assets  but 
what  belong  to  its  inhabitants  and  no  obligations  but  what  thei^  private  estates  are  pledged 
to  discharge,  no  significance  attaches  to  the  wealthlheld  in  coriunon  bey on^  what  attaches 
to  the  wealth  held  by  each  and  all  individually. 

When  a  public  work  is  undertaken,  the  funds  are  raised  upon  the  credit  of  the  collective 
private  wealth  which  is  ultimately  £p  bear  the  burden  of  discharging  the  obligation  so  cre- 
ated. When  the  work  is  completed  and  put  into  service  by  ihe  city,4ke  accoiffit  credited 
with  the  funds  raised  and  charged  with  the  expenditure  thereof  is  closed  upon  its  books 
and  marks  the  discharge  ofwe  trust;  while  the  value  of  the  addecftacility*  whatever  it  may 
be,  is  at  once  absorbed  V^nte  private  estates  benefited  anjl  occasions  a  lajient  increase  in 
their  value.  Any  attempt,  therefore,  to  recognize  in  the  general  statement  of  the  condition 
of  a  city  the  values  of  common  properties,  as  if  the  same  were  assets  available  for  conver- 
sion into  funds  to  liquidate  liabilities  or  to  measure  a  wealth  that  could  be  mortgaged  by 
or  partitioned  among  the  inhabitants,  as  if  they  were  so  many  stockholders,  in  the  same 
manner  as  the  fixed  assets  of  a  private  corporation,  is  seeking  to  express  a  condition  that 
does  not  exist  and  forcing  a  construction  that  is  fictitious,  arbitrary,  meaningless,  and 
withal  misleading. 

The  accounts  of  a  city,  if  properly  kept,  clearly  indicate  the  several  sources  of  receipts 
under  a  normal  and  therefore  easily  comprehended  classification.  Collection'  of  taxes 
would  not  be  confounded  with  proceeds  from  the  sale  of  bonds,  and  receipts  which  are 
immediately  realized  would  be  clearly  distinguished  from  those  which  draw  upon  future 
resources.  In  the  same  manner  payments  for  the  current  expenses  of  administration, 
and  made  out  of  appropriations  or  anticipations  thereof,  call  for  a  radically  different  pro- 
cedure with  respect  to  both  provision  and  expenditure  from  those  which  characterize  the 
projection  of  public  works  and  relate  to  extensions  of  the  city's  equipment  and  facilities. 

But  while  the  receipts  may  reflect  broadly  the  distinction  just  noted,  i.  e.,  as  derived 
respectively  from  present  and  from  future  resources,  there  is  a  large  proportion  that 
occupy  a  middle  ground,  as  well  as  to  which  other  and  varied  specific  considerations  apply, 
and  the  two  extremes  so  shade  into  each  other  that  any  attempt  to  draw  a  line  and  establish 
an  absolute  division  under  such  terms  as  "capital"  and  "revenue,"  or  "ordinary"  and 
"extraordinary,"  can  be  done  only  at  the  sacrifice  of  a  rational  and  truly  significant  classi- 
fication (which  the  accounts  automatically  provide  in  their  natural  action),  and  the  substi- 
tution therefor  of  an  artificial  and  arbitrary  distinction  which  is  meaningless  because 
unreal.  In  like  manner,  while  the  payments  may  reflect  broadly  the  distinction  between 
immediate  necessities  and  projected  betterments,  there  also  exists  a  large  range  of  outlay 
upon  debatable  ground,  qualified  by  isolated  peculiarities  of  purpose  and  expedient  that 
places  them  without  the  pale  of  any  such  immediate  distinction,  and  accordingly  the  same 
reason  that  discourages  an  arbitrary  classification  of  receipts  under  the  two  heads  stated 
applies  with  equal  force  to  payments. 

Certain  undertakings  which  yield  substantial  income  are  constructed  solely  by  other 
funds  than  those  that  spring  from  them.  The  dock  department  of  the  city  of  New  York, 
for  instance,  is  financed  entirely  by  the  issue  of  dock  bonds  and  the  premiums  realized 
thereon,  both  for  administration  and  construction.  The  distinctive  receipts  of  the  depart- 
ment, however,  from  dock  and  slip  rents  are  pledged  to  the  sinking  fund,  which  is  charged 


UNIFORM    MUNICIPAL   ACCOUNTING.  101 

with  the  redemption,  among  other  obligations,  of  said  dock  bonds,  while  the  receipts  from 
ferry  rents  are  pledged  to  the  sinking  fund,  which  is  charged  with  the  payment  of  interest  on 
said  bonds. 

Certain  accounts  receive  credit  from  both  appropriations  and  loans,  as,  for  instance, 
the  fund  for  street  and  park  openings  of  the  city  of  New  York,  where  we  find  local  assess- 
ments, corporate  stock,  revenue  bonds  special,  and  a  direct  tax  in  the  annual  budget,  each 
carrying  its  quota  of  the  aggregate  provision  to  a  common  purpose  under  the  operation  of 
laws  prompted  by  adequate  reasons  and  collectively  resulting  in  such  a  scheme  of  finance 
for  this  particular  undertaking. 

The  total  collections  of  water  rates  and  interest  thereon  in  the  boroughs  of  Manhattan 
and  the  Bronx  are  deposited  to  the  credit  of  "the  sinking  fund  for  the  payment  of  interest 
on  the  city  debt,"  while  the  operation  of  the  water  system  is  provided  for  by  appropriation. 
The  surplus  revenue  of  said  sinking  fund  for  interest  is  transferred  to  the  sinking  fund  for 
redemption  of  the  city  debt,  and  the  surplus  revenue  of  said  sinking  fund  for  redemption  is 
invested  in  general  fund  bonds,  the  proceeds  of  which  are  deposited  to  the  credit  of  the 
general  fund  and  used  for  the  reduction  of  taxation;  while  the  interest  on  said  bonds  is  paid 
out  of  the  general  fund  and  into  the  sinking  fund  holding  them. 

The  foregoing  are  but  a  few  of  innumerable  like  instances  of  expedients  perfectly  justi- 
fiable and  rendered  mandatory  by  legal  enactment,  which  go  to  prove  the  absence  of  the 
distinctions  of  capital  and  revenue  as  fundamental  factors  in  municipal  accounts,  the 
interlocking  complications  and  flexibility  of  which  justify  the  conclusion,  that  they  con- 
stitute but  a  series  of  related  trust  funds  and  deal  primarily  with  the  receipts  and  payments 
incident  to  their  several  means  and  purposes. 

Thus  far  the  argument  has  been  confined  to  the  general  or  controlling  accounts  as  con- 
tained in  the  comptroller's  ledger,  but  there  is  another  field  of  municipal  accounts  to  be 
considered,  namely,  that  which  relates  to  the  detail  and  action  of  specific  departments, 
bureaus,  or  undertakings  regarded  separately. 

The  accounting  system  of  every  specific  city  department  or  subordinate  bureau  must 
reflect  such  department's  separate  and  complete  entity  as  well  as  function;  for,  notwith- 
standing that  its  transactions  all  clear  through  the  general  accounts  under  such  classification 
of  elements  as  its  returns  through  accounts  current  require  and  establish,  the  details  of 
such  upon  its  own  books  must  mark  as  complete  a  revolution  as  if  its  existence  were  entirely 
independent,  but  including  always,  in  the  circle  of  action,  an  account  properly  expressive 
of  its  accountability  as  a  factor  to  the  whole,  and  which  account  is  complementary  to  the 
controlling  account  or  accounts  on  the  general  ledger  of  the  city  dealing  with  such  depart- 
ment or  bureau. 

The  only  principle  germane  to  our  subject  to  be  developed  in  this  connection  is  that 
while  the  general  accounts  of  the  city  reflect  neither  capital  not  profits  with  respect  to  the 
value  or  earnings  of  public  utilities,  the  department  accounts  may  properly  do  so  in  certain 
instances.  Municipal  gas  and  electric  plants,  waterworks,  or  street  car  lines,  when  acquired 
and  operated  by  the  city  as  municipal  industries,  should  be  controlled  by  a  system  of 
accounts  cast  upon  the  same  lines  as  those  of  similar  private  enterprises,  and  the  distinction 
between  capital  and  revenue  should  be  made  in  precisely  the  same  manner  as  is  done  by 
private  corporations,  with  the  exception  that  the  city  constitutes  the  sole  proprietary 
interest  and  stands  in  the  position  of  holding  all  the  stock.  This  apparent  recantation  of 
the  doctrine  previously  advocated  in  this  paper  arises  from  the  fact  that  a  municipality  is 
not  essentially  an  industrial  enterprise,  and  when  trading  functions  are  undertaken  by  it 
they  must  be  regulated  and  their  operations  reported  by  accounts  conducted  in  accordance 
with  that  of  private  business,  involving  not  only  the  underlying  principles  of  capital  and 
revenue,  but  also  such  relationship  thereof  as  will  justify  either  the  continuance  or  abandon- 
ment by  the  city  of  such  undertaking.  For  these  reasons  they  are  regarded  in  the  light 
of  a  municipal  enterprise  isolated  from  the  function  of  city  government,  but  financed  by 
the  city  treasury  and  underwritten  by  the  public  credit. 


102  UNIFORM    MUNICIPAL    ACCOUNTING. 

Let  us  follow  the  simple  action  of  the  accounts  that  would  be  raised  upon  the  general 
books  and  department  books  incident  to  the  construction  and  operation  by  the  city  of 
waterworks. 

First.  Upon  the  general  books. 

The  bonds  issued  for  waterworks  construction  should  be  charged  to  "principal  of  the 
city  debt"  and  credited  to  "water  bonds"  in  the  full  amount  of  the  loan.  The  cash  pro- 
ceeds of  said  bonds  would  be  credited  to  water  construction  fund,  creating  a  letter  of  credit 
against  which  drafts  would  be  drawn  for  construction,  and  which  fund  would  liquidate 
upon  the  completion  of  the  work.  When  the  loan  or  parts  thereof  matured,  "water  bonds " 
would  be  charged  and  "principal  of  the  city  debt"  credited,  and  the  cash  payment  therefor 
would  be  charged  to  "appropriation  for  redemption  of  debt"  or  to  "sinking  fund,"  as  the 
case  might  be. 

Appropriations  for  operation  and  the  drafts  thereon,  pending  the  development  of  the 
industry  and  revenue  therefrom  sufficient  for  its  purposes,  would  form  part  of  the  depart- 
mental budget  and  tax  levy,  while  after  the  current  revenue  exceeded  the  current  expenses 
a  "water  revenue  account"  would  receive  credit  for  the  water  rates,  be  charged  with  the 
operating  expenses  and  annual  application  of  surplus  to  either  redemption  of  loan  or 
reduction  of  taxation. 

The  former  would  comprehend  all  the  general  accounts,  and,  apart  from  those  dealing 
with  the  loan,  would  constitute  merely  letters  of  credit  available  for  payment  of  related 
claims. 

Second.  Upon  the  departmental  books. 

The  proceeds  of  the  bonds  would  be  charged  to  "construction  fund"  and  credited  to 
"water  loan"  for  the  par  value,  and  to  "premium  account"  for  the  premiums,  if  any. 

The  cost  of  erecting  and  equipping  the  works  would  be  credited  to  construction  fund 
and  charged  to  the  several  construction  accounts,  classifying  such  expenditure  under  titles 
expressive  of  the  distinctive  parts  or  features  of  the  work  and  the  specific  character  of  the 
properties  created  or  assets  acquired. 

The  redemption  of  the  bonds,  whether  by  direct  taxation  or  by  sinking  fund  install- 
ments, would  result  ultimately  in  a  charge  to  "water  loan"  and  credit  to  "appropriation 
for  redemption,"  and  when  finally  both  the  construction  fund  and  water  loan  were  liqui- 
dated the  books  would  show  the  property  values  standing  at  the  debit  as  assets  and  bal- 
anced by  the  appropriations  for  redemption  and  premium  account  standing  at  the  credit 
as  liabilities.  As  the  assets  and  liabilities,  however,  are  merely  nominal  and  are  expressed 
only  for  purposes  of  record,  they  may  then  be  all  cleared  into  a  general  re'sume',  and  so 
disappear  from  the  succeeding  trial  balances  of  the  departmental  ledger.  Any  preliminary 
"appropriations  for  operation"  and  all  subsequent  receipts  for  water  service  and  other 
income  would  be  charged  to  "operating  fund"  and  credited  to  the  several  income  accounts, 
classifying  said  receipts  under  titles  expressive  of  their  source,  including  "appropriations 
for  operation"  when  active.  The  operating  cost  would  be  credited  to  the  "operating 
fund"  and  charged  to  the  several  expenditure  accounts,  classifying  said  expenditures 
under  titles  expressive  of  their  nature  and  purpose.  The  surplus  revenue  over  and  above 
the  requirements  of  operation,  when  realized  and  paid  over  to  the  city  treasury,  would  be 
credited  to  operating  fund  and  charged  to  surplus  revenues,  which  latter  account  would 
rank  against  the  appropriations  received  and  show  the  recovery  by  the  city  of  its  initial 
advances,  and  later,  by  showing  its  relative  volume  to  the  sum  of  interest  on  loan,  reserve* 
for  depreciation,  and  kindred  considerations,  would  measure  the  advantages  or  disad- 
vantages of  municipal  management  as  compared  with  private  management  of  such  industry 
as  the  city  undertakes  to  engage  in. 

By  bringing  together  the  several  income  and  expenditure  accounts  at  the  close  of  each 
fiscal  period,  it  will  appear  that  the  income  accounts  are  balanced  by  the  charges  to  operat- 
ing fund  and  the  expenditures  by  the  credits  to  operating  fund,  while  the  balance  of  the 
operating  fund,  less  any  margin  reserved,  will  equal  the  surplus  revenue  transferred,  so  that 


UNIFORM    MUNICIPAL    ACCOUNTING.  103 

by  making  the  proper  transfer  entries  all  accounts  will  close  with  the  exception  of  unliqui- 
dated items,  leaving  a  full  record  but  withal  a  clean  slate,  and  all  considerations  of  capital 
and  revenue  comfortably  housed  and  out  of  the  way. 

The  foregoing  outline  relating  to  the  accounts  dealing  with  municipal  enterprises  has,  for 
purpose  of  illustration,  been  confined  to  a  cash  action;  but  as  assets  by  way  of  accrued  income, 
and  liabilities  upon  admitted  claims  unliquidated,  and  constituting  respectively  the  trade 
debtors  and  creditors,  will  be  a  constant  factor  in  the  assets  and  liabilities,  and  require  suit- 
able provision  in  the  accounts,  certain  individual  and  controlling  accounts  will  appear  in 
addition  to  those  named,  as  would  also  be  the  case  in  the  accounts  of  a  private  water  company; 
but  it  would  be  only  a  matter  of  time  to  show  their  articulation  with  the  accounts  mentioned, 
and  it  is  unnecessary  to  do  so  in  order  to  illustrate  the  point. 

The  arguments  preceding  and  regarding  the  underlying  principles  governing  the  general 
accounts  of  a  city  are  connected  inseparably  with  and  form  part  of  our  subject  relating  to 
the  properly  accredited  municipal  balance  sheet.  In  a  former  paper  on  this  subject  sub- 
mitted by  me  at  the  first  conference  held  by  the  Census  Bureau,  in  November,  1903,  I  said, 
iiiier  alia: 

The  public  works,  improvements,  and  utilities  possessed  by  the  community  belong  to  the 
people  and  the  municipal  corporation  is  merely  the  keeper  or  trustee,  possessing  no  right  to 
sell  or  convert  that  would  warrant  their  inclusion  on  a  balance  sheet  designed  for  the  pur- 
pose of  expressing  the  related  resources  and  obligations  of  an  estate  with  the  implied  realiza- 
tion of  the  one  for  the  liquidation  of  the  other. 

In  order  that  a  balance  sheet  may  have  any  excuse  for  being,  a  positive  and  essential  mean- 
ing must  attach  to  the  balance  stated  thereon ;  and  therefore  the  balance  sheet  of  a  munici- 
pality must  array  on  its  opposite  sides  only  such  values  as  can  be  measured  and  the  difference 
between  which  represents  the  value  of  a  significant  and  appreciable  fact. 

The  balance  sheets  which  of  late  years  have  appeared  in  certain  municipal  reports  have 
apparently  been  created  from  an  erroneous  conception  of  the  true  status  of  a  municipality, 
comparing  and  confusing  it  with  a  commercial  undertaking  and  arraying  among  the  assets, 
in  addition  to  cash  and  elements  realizable,  such  items  as  the  cost  or  the  conceded  values  of 
parks,  bridges,  schools,  and  other  public  buildings,  waterworks,  and  similar  possessions, 
broadly  designated  as  "  fixed  assets,"  "  capital  assets,"  "  unavailable  assets,"  etc.,  and  array- 
ing as  liabilities  the  floating  and  funded  debt. 

The  most  recent  development -of  a  balance  sheet  cast  on  the  lines  referred  to  which  has 
come  to  my  notice  classifies  the  "assets"  i  ?)  of  the  city  under  review  as  follows.  ''Capital 
assets,"  " fixed  properties."  "remunerative  and  realizable,"  " unremunerative  but  realiza- 
ble," "  unremunerative  and  unrealizable."  The  assets  classed  as  "  remunerative  and  realiza- 
ble" we  find  to  be  the  waterworks;  the  "unremunerative  but  realizable,"  parks,  boulevards, 
public  buildings  and  their  equipment,  and  equipment  of  all  kinds  belonging  to  the  city;  and 
the  "unremunerative  and  unrealizable"  comprise  bridges,  street  pavements,  sewers,  etc., 
and  amount  to  fully  45  per  cent  of  the  whole. 

The  further  the  principle  of  accounting  which  leads  up  to  a  balance  sheet  such  as  referred  to 
is  exploited  the  more  remote  we  are  from  the  plane  of  reasoning  to  which  we  will  ultimately 
have  to  return,  and  the  further  deferred  is  the  time  when  a  "  municipal  balance  sheet ''  will  be 
realized  which  will  reflect  underlying  truths  and  show  clearly  to  bondholders  and  taxpayers 
alike  the  assets  and  true  status  of  the  municipality. 

The  floating  status  of  a  municipality  is  determined  by  the  difference  between  the  cash 
funds  and  realizable  assets,'such  as  taxes,  assessments,water  rents  and  miscellaneous  revenues, 
so  far  as  contained  in  the  books,  on  the  one  hand;  and  on  the  other,  by  the  cash  liabilities 
upon  warrants  registered,  claims  admitted  by  the  auditor,  and  contingent  liabilities,  reported 
by  the  several  departments  with  due  regard  to  preserving  the  proper  relation  between  the 
resources  and  obligations,  so  that  the  realization  of  the  one  would  measure  the  means  of  liqui- 
dating the  other;  the  result  of  balance  would  show  the  condition  of  the  public  trust  with 
respect  to  its  floating  assets  and  liabilities  at  the  date  specified,  and  indicate  accordingly  the 
deficiency  to  be  met  in  the  ensuing  period  or  the  surplus  available  for  lessening  the  succeed- 
ing year's  tax  levy;  in  short,  such  a  balance  would  show  what  has  been  taken  from  or  would 
be  added  to  the  resources  of  the  period  following. 


104  UNIFOKM    MUNICIPAL    ACCOUNTING. 

Under  the  constitution  of  the  state  of  New  York  the  debt  contracting  power  of  cities 
within  its  borders  is  limited  to  10  per  cent  of  the  taxable  value  of  the  real  estate  subject  to 
taxation  within  the  corporate  limits  of  the  municipality,  and  it  therefore  becomes  a  matter 
of  great  importance  to  determine  correctly  the  margin  of  credit  yet  available  for  issuing 
corporate  bonds  of  the  municipality.  The  determination  of  this  important  feature  in  munici- 
pal finance  forms  the  subject  of  the  second  development  of  the|  municipal  balance  sheet, 
arraying  as  liabilities  the  gross  funded  debt  of  the  municipality  less  the  amount  thereof 
held  by  the  sinking  funds  of  the  city  itself;  and  on  the  other  hand,  showing  as  the  only  asset 
possessed  by  the  city  the  amount  representing  10  per  cent  of  its  real  estate  subject  to  taxation. 
The  resultant  balance  is  what  the  municipal  corporation  may  be  fairly  said  to  possess  by 
virtue  of  its  charter  and  functions,  and  therefore  constitutes  the  sole  basis  of  its  credit  and  the 
measure  of  its  right  to  engage  in  future  public  undertakings. 

These  opposing  principles  in  municipal  accounting,  as  reflected  by  the  two  forms  of  balance 
sheets  referred  to  herein,  were  compared  during  the  latter  part  of  1904  by  the  comptroller 
of  one  of  our  largest  cities  in  such  graphic  parallel,  in  an  official  communication  bearing  on 
the  subject,  that  I  feel  constrained  to  introduce  the  following  excerpt  therefrom: 

The  proposition  has  been  considered  and  discussed  of  substituting  this  (new)  form  and 
method  of  accounting  for  these  liabilities  in  place  of  the  method  now  in  vogue,  which  is 
to  array  against  these  liabilities  as  offsetting  resources  the  property  of  the  city,  such  as  real 
estate,  buildings  and  equipments,  and  then  set  forth  the  resultant  balance,  presumably  as  an 
exponent  of  a  condition  of  the  municipal  trust  or  of  the  value  of  the  city's  credit,  of  which 
it  is  neither. 

The  main  points  favoring  a  substitution  of  this  method  of  accounting  for  this  phase  of  the 
city's  finances  are  as  follows: 

First.  The  new  form  sets  forth  an  alignment  of  resources  and  liabilities  which  are  not  only 
both  of  the  same  nature  and  actuality,  but  absolutely  and  specifically  correlative. 

Second.  In  the  old  form  there  is  an  array  of  assets  of  no  bearing  or  value  toward  the  pay- 
ment of  the  liabilities  against  which  they  are  arrayed,  or  the  payment  of  any  other  liability 
of  the  city.  They  do  not  even  represent,  as  is  supposed  by  some,  the  product  of  the 
liabilities. 

Third.  The  resultant  balance,  as  shown  in  the  new  form,  sets  forth  a  real  condition  in  the 
finances  of  the  city,  the  knowledge  of  which  is  important  to  their  proper  administration. 

Fourth.  The  resultant  balance  in  the  old  form  sets  forth  no  appreciable  condition  or  value 
whatever. 

Fifth.  The  new  form  displays  every  feature,  both  of  nature  and  purpose,  essential  to  a 
properly  accredited  balance  sheet.  Tt  arrays  values  which  are  real,  measured,  and  correlative, 
and  from  which  is  deducible  a  condition  necessitating  thought  and  action.  It  constitutes, 
in  a  word,  a  proper  coordination  of  financial  data  and  value^  around  a  problem  of  municipal 
administration  which  is  practical  and  useful. 

Sixth.  The  old  form  is  simply  an  attempted  amalgamation  of  heterogeneous  values  pro- 
ducing a  resultant  balance  of  no  actual  meaning,  disclosing  no  condition  of  debt  or  value  of 
proprietorship;  but,  on  the  other  hand,  by  its  use  conceals  a  problem  which  is  important  and 
should  be  clearly  set  forth  to  those  administering  the  finances  of  the  city. 

Seventh.  Jt  may  be  added  that  the  use  of  this  new  form  and  method  in  the  past  might 
have  prevented  entirely  the  deficiencies  of  resources  which  appear  upon  this  balance  sheet, 
or  at  least  it  would  have  prevented  the  concealment  of  this  condition  from  the  different 
administrations . 

The  main  objects  of  a  municipal  balance  sheet  should  be  to  show  (i)  the  floating  status 
of  the  city  and  the  possibilities  of  realization  to  liquidate  current  liabilities;  and  (6)  to  show 
clearly  the  legal  margin  of  its  borrowing  capacity,  so  that  the  prospective  bond  buyer  and 
taxpayer  alike  may  know  at  once  the  measure  of  its  right  to  engage  in  public  undertakings. 

Can  either  of  these  essentials  be  deduced  from  a  balance  sheet  which  arrays  as  "  assets  " 
the  properties  of  the  city,  of  the  people  in  common,  none  of  which  could  be  parted  with,  and 
the  city  still  cany  on  its  governmental  functions  ? 

Do  even  those  classed  as* 'remunerative  and  realizable  "  possess  any  power  or  value  toward 
the  payment  of  any  liability  arrayed  on  the  opposite  side  of  the  balance  sheet?  Its  water- 
works are  essential  to  the  health  and  well-being  of  its  people  and  could  not  be  "realized" 
upon  or  parted  with  except  at  great  detriment  to  the  city's  interests,  and  neither  school- 
houses,  police  or  fire  stations,  nor  any  other  of  the  public  properties  classed  as  "unremunera- 
tive  but  realizable"  possess  any  power  or  value  toward  the  payment  of  any  debt  of  the  city; 


UNIFORM    MUNICIPAL   ACCOUNTING.  105 

neither  could  they  be  "realized"  upon  or  parted  with  by  the  city  except  at  the  expense  of 
substituting  other?  (in  all  probability  of  an  improved  character)  in  their  place,  and  thus 
creating  additional  liability. 

The  very  suggestion  that  a  city  might  sell  its  waterworks,  which  is  in  a  measure  indicated 
by  arraying  such,  as  a  realizable  and  remunerative  asset,  against  its  liabilities,  is  a  backward 
step  in  these  days  of  progressive  municipal  administration,  when  all  citie^  of  any  note,  even 
lethargic  London,  are  awakening  to  this  prime  necessity  of  possessing  and  operating  their 
own  water  supply  system. 

Is  the  form  of  balance  sheet  in  question  any  more  than  in  the  words  previously  quoted, 
"simply  an  attempted  amalgamation  of  heterogeneous  values  producing  a  resultant  bal- 
ance of  no  actual  meaning,  disclosing  no  condition  of  debt  or  value  of  proprietorship;  but, 
on  the  other  hand,  by  its  use  conceals  a  problem  which  is  important  and  should  be  clearly 
set  forth  to  those  administering  the  finances  of  the  city?" 

The  municipal  balance  sheet  which  I  outlined  in  the  paper  presented  in  1903  would  dis- 
play every  feature,  both  of  nature  and  purpose,  essential  to  a  properly  accredited  balance 
sheet.  It  would  array  values,  real,  measured,  and  correlative,  and  from  which  would  be 
deducible  an  actual  condition.  It  would  constitute  a  proper  coordination  of  financial 
data  and  values  around  a  problem  of  municipal  administration  at  once  practical  and  useful. 

As  an  appendix  to  the  properly  accredited  municipal  balance  sheet  a  statement,  showing 
on  the  one  side  the  total  cost  of  all  city  properties,  such  as  public  buildings,  docks  and  ferries, 
waterworks,  etc.  (as  far  as  such  could  be  ascertained  from  the  records),  and  on  the  other, 
the  current  conceded  values  of  same,  would  throw  some  light  on  the  administrative  side  of 
the  question,  and  thus  viewed  would  have  its  own  interest;  but  to  include  the  values  of  such 
as  an  integral  part  of  the  balance  sheet  proper  would  be,  in  fact,  to  repeat  values  that  were 
merged  already  into  and  have  become  a  part  of  the  values  of  the  taxable  real  estate  of  its 
citizens  and  on  which  alone  the  credit  of  the  municipality  could  be  based,  and  which 
measured  its  legal  right  to  or  precluded  it  from  immediately  engaging  in  further  public 
undertakings. 

If,  on  the  other  hand,  the  legal  right  of  a  municipality  to  engage  in  permanent  improve- 
ments were  to  be  determined  by  the  so-called  "capital  surplus,"  as  arrived  at  by  arraying 
the  cost  of  streets,  sewers,  parks,  bridges,  public  buildings  and  equipment,  etc.,  against  the 
sum  of  the  unliquidated  liabilities  incurred  to  meet  the  same,  the  resultant  balance  of  which 
is  stated  as  the  capital  surplus,  such  a  course  would  probably  emphasize  a  policy  that  is 
followed  largely  by  British  cities  of  making  the  future  pay  the  total  cost  of  all  public 
improvements,  and  thus  become  a  factor  in  leading  the  cities  of  the  United  States,  as  it  has 
lead  many  British  cities,  into  inordinate  increase  of  the  public  debt. 

The  CHAIRMAN.  Just  a  moment,  please.  I  believe  we  were  going 
to  have  the  committee  report.  Mr.  Chase,  is  the  committee  ready 
to  report? 

Mr.  CHASE.  It  has  not  come  in  yet. 

The  CHAIRMAN.  Then  we  will  go  on. 

Mr.  CHASE.  Mr.  Maclnnes's  views  on  the  municipal  balance  sheet 
should  be  received  with  great  interest  and  attention  by  all  of  us.  It 
seems  to  me  that  when  we  get  down  to  a  final  statement  as  to  what 
the  difference  is  between  the  two  points  of  view,  one  represented  by 
Mr.  Maclnnes  and  one  represented  by  the  gentlemen  on  the  other 
side,  we  find  two  propositions  on  each  side.  In  one  we  have  a  balance 
sheet,  which  Mr.  Maclnnes  has  described  as  the  "old  form,"  in  which 
the  costs  of  public  properties  are  set  upon  the  left  hand  and  the  out- 
standing bonds  set  upon  the  right  hand.  This  form  of  "  balance 
sheet"Lis,  in  fact,  a  trial  balance  of  the  books,  set  up  for  purposes  of 


106  UNIFORM    MUNICIPAL    ACCOUNTING. 

disclosing  the  costs  of  properties,  but  not,  as  Mr.  Maclnnes  infers, 
for  determining  the  "surplus"  of  a  city.  Looked  at  from  the  trial 
balance  point  of  view,  the  municipal  balance  sheet  arranged  in  that 
way  is  a  proper  statement.  In  addition  to  such  a  statement  there 
must  be,  either  in  the  form  of  a  balance  sheet  like  Mr.  Maclnnes's 
or  in  the  form  of  a  statistical  statement,  as  is  ordinarily  provided 
in  municipal  reports,  some  presentation  of  the  debt,  the  debt  limit, 
and  the  available  debt  margin  within  which  new  debt  can  be  issued. 
Taking  the  first  case,  we  have  a  balance  sheet  showing  the  cost  of 
properties,  and  in  addition  a  statistical  schedule  of  the  debt  limit. 
In  Mr.  Maclnnes's  form  we  have  a  balance  sheet  of  the  debt  and  the 
debt  limit,  a  statistical  statement  of  the  cost  of  properties.  I  do  not 
see  that  there  is  any  important  difference  in  the  two  points  of  view. 

The  CHAIRMAN.  While  the  committee  are  discussing  their  report, 
I  wish  to  call  the  attention  of  some  of  the  students  of  this  subject 
who  have  examined  the  British  reports,  or  might  wish  to  note  cer- 
tain peculiarities,  to  the  fact  that  the  most  prominent  of  the  British 
exhibits  and  the  one,  the  balance  sheet,  to  which  Mr.  Maclnnes  took 
exception,  does  not  use  the  word  "asset"  in  any  form  whatever. 

Mr.  MAC!NNES.  The  British  one? 

The  CHAIRMAN.  The  "Borough  Bolton"  balance  sheet,  so-called, 
does  not  have  the  word  "asset"  in  it,  and  that  exhibit  does  not  pre- 
tend to  be  a  balance  sheet. 

Mr.  MAC!NNES.  That  is  the  Bolton  one? 

The  CHAIRMAN.  It  speaks  of  the  various  classes  of  public  works 
and  the  liabilities  that  the  city  or  borough  has  incurred  by  reason  of 
such  works  in  their  requirement.  This  may  be  a  fact  that  has  a 
significance  from  the  accounting  standpoint  or  the  statistical  stand- 
point, or  it  may  not.  As  I  understand  Mr.  Maclnnes,  he  would  not 
object,  necessarily,  to  such  a  thing  as  a  statistical  exhibit,  provided 
it  was  not  called  a  balance  sheet.  I  would  like  to  have  him  state 
what  is  his  attitude  toward  the  last  statement. 

Mr.  MAC!NNES.  Mr.  Chairman,  providing  that  it  did  not  mean 
open  accounts  in  the  ledger  as  carried  on  the  books  as  assets  of  the 
city,  I  believe  that  affixing  to  the  balance  sheet  the  statement, 
such  as  the  city  of  Bolton  does — not  displayed  by  them  as  a  balance 
sheet  at  all,  but  simply  as  a  statement  of  the  cost — would  have  its 
own  particular  interest. 

Mr.  TRACY.  I  would  like  to  tell  Mr.  Maclnnes  of  the  difficulty 
that  occurred  in  one  of  the  smaller  cities  in  Ohio.  The  people  of  the 
city  desired  to  secure  a  railroad  through  their  place,  and  they  pro- 
ceeded to  offer  a  bonus  of  $80,000  (I  think  it  was)  to  secure  the  rail- 
road for  their  city.  The  limitation  upon  the  bonded  debt  of  cities 
of  Ohio  is  8  per  cent  of  the  duplicate  value.  The  bond  for  the  purpose 
of  raising  a  bonus  was  floated.  When  the  supreme  court  of  Ohio 


UNIFORM    MUNICIPAL    ACCOUNTING.  107 

passed  upon  the  case,  it  pronounced  them  special  assessment  bonds, 
a  part  of  the  bonded  debt,  and  so  decreasing  the  available  debt 
limit  of  the  city.  The  issue  was  floated  and  the  bonds  fell  into  the 
hands  of  outside  parties.  The  supreme  court  of  Ohio  held  that 
the  bonds  need  not  be  paid;  they  were  illegal,  and  that  the  purchasers 
of  the  bonds  should  have  taken  cognizance  of  the  limit  provided  by 
the  Ohio  statute.  The  United  States  court  held  that  the  citizens 
had  overstepped  their  rights  and  that  the  city  would  have  to  pay  for 
them.  Now,  just  what  condition  would  the  balance  sheet  of  that  city 
show  under  those  conditions  ? 

Mr.  MAC!NNES.  If  the  Supreme  Court  of  the  United  States  can 
determine  that  those  bonds  were  an  obligation  of  that  city,  the  bonds 
would  show  as  part  of  that  debt. 

Mr.  TRACY.  The  obligation  would  be  a  deficiency. 

Mr.  MAC!NNES.  In  other  words,  it  would  be  debarred  in  the  state 
of  Ohio  until  the  assessed  value  of  the  property  had  risen  to  wipe 
out  that  deficiency. 

Mr.  TRACY.  Yes;  but  how  would  it  stand  in  view  of  the  decision 
of  the  Supreme  Court  of  the  United  States  ? 

Mr.  MAC!NNES.  You  say  the  Supreme  Court  of  the  United  States 
said  that  they  must  be  paid? 

Mr.  TRACY.  The  Supreme  Court  said  that  they  overstepped  their 
rights.  The  bonds  were  floated.  They  should  have  been  enjoined. 

Mr.  MAC!NNES.  But  that  would  make  no  difference  whatever  in 
dealing  with  the  bonded  debt.  It  appeared  to  the  Supreme  Court 
that  the  city,  having  received  money  in  return  for  those  bonds,  was 
under  obligation  to  pay  them,  and  the  only  penalty  imposed  upon 
the  citizens  thereby  consisted  in  restricting  the  city  from  incurring 
any  further  debt.  That  was  the  penalty.  Just  a  moment;  I  will 
give  you  a  somewhat  similar  illustration.  In  1895,  when  the  con- 
stitutional limitation  of  10  per  cent  on  real  estate  of  the  assessed 
value  was  enforced  upon  a  greater  number  of  cities  than  had  hereto- 
fore obtained,  Long  Island  City  found  itself  with  a  debt  beyond  10  per 
cent  of  the  assessed  valuation  of  the  real  estate  within  its  corporate 
limits.  The  result  was  that  Long  Island  City  could  make  no  further 
improvements.  Long  Island  City  was  estopped  by  law  from  making 
any  further  improvements  except  such  as  it  could  meet  from  current 
revenues,  but  the  law  did  not  say  that  the  fifty  or  one  hundred  dollars' 
worth  of  bonds  that  were  in  excess  of  the  debt  limit  were  worthless — 
not  at  all.  The  obligation  assumed  by  the  city  when  the  bonds  were 
issued  continued,  so  far  as  the  city  was  concerned,  but  its  citizens 
were  punished  to  the  extent  of  not  being  able  to  do  anything  until 
they  had  increased  their  valuation.  So  your  case  in  Ohio,  although 
predicated  on  a  different  condition,  resulted  in  the  very  same  thing. 


108  UNIFORM    MUNICIPAL    ACCOUNTING. 

Mr.  HENDERSON.  We  have  failed  to  find  three  members  of  our 
committee.  If  Messrs.  Turner,  Shepard,  and  Tyson  are  in  the  room, 
will  they  please  come  forward  and  sign  the  report? 

In  behalf  of  the  committee  on  resolutions  and  procedure  I  beg 
leave  to  submit  the  following  as  its  report: 

Your  committee  upon  resolutions  and  procedure  submits  the  following  for  the  consider- 
ation of  the  conference  and  recommends  its  adoption: 

First.  It  is  the  opinion  of  this  conference  that  it  is  expedient  for  it  to  indorse  a  definite 
form  for  the  annual  reports  of  city  comptrollers  and  city  auditors  and  to  urge  upon  city 
councils,  through  the  officials  attending  this  conference  and  otherwise,  the  adoption  of  the 
form  herein  described  for  all  such  reports. 

Second.  That  the  basis  for  such  definite  form  should  be  the  distribution  of  accounts 
prepared  by  the  Census  Bureau,  labeled  G12. 

Third.  That  the  departures  from  this  form  should  be  none  other  than  those  suggested 
or  sanctioned  by  the  Census  Bureau. 

The  changes  in  G12,  recommended  by  the  committee,  if  found  expedient  by  the  Census 
Bureau,  are  as  follows: 

Inquiry  3c. — Damage  settlements  and  judgments,  to  be  transferred  to  inquiry  80. 

Inquiry  5a. — Add  the  words  "vital  statistics"  in  parenthesis. 

Inquiry  9. — To  be  transferred  to  inquiry  80. 

Division  IV. — Public  highways  and  sanitation.  It  is  recommended  that  "public  sanita- 
tion" be  embraced  in  a  separate  division,  and  that  inquiry  4  be  devoted  only  to  "public 
highways." 

Division  VI. — Public  recreation.  It  is  recommended  that  inquiry  "public  playgrounds" 
be  added  after  "public  parks." 

Under  Division  X. — "Public  debt."  It  is  recommended  that  the  following  subdivisions 
be  used,  to  wit:  Funded  debt;  current  revenue  debts;  special  assessment  debts;  judg- 
ments for  prior  years;  miscellaneous  debts. 

Inquiry  84. — It  is  suggested  that  the  purpose  of  the  subdivisions  be  made  clear  by  the 
addition  of  a  few  explanatory  notes. 

Division  XI. — Taxes,  etc.  (payments),  is  to  be  transferred  to  a  page  preceding  "general 
administration"  and  arranged  in  a  form  corresponding  to  "receipts  from  taxes,"  "licenses," 
etc.  The  definite  form  of  schedule,  as  thus  amended,  is  hereto  appended. 

In  the  opinion  of  the  conference  it  is  essential  that  payments  on  account  of  "expense" 
of  every  city  be  separated  distinctly  from  "outlays"  for  construction,  and  that  separate 
columns  or  separate  schedules  be  universally  required  for  these  statements  in  all  municipal 
reports. 

Therefore,  ~be  it  resolved,  That  the  conference  recommends  to  the  municipalities  of  the 
United  States,  through  the  accounting  and  auditing  officials  here  assembled,  that  special 
efforts  be  made  by  all  cities  to  supply  the  information  desired  by  the  Census  Bureau  touch- 
ing the  administration  of  their  accounts,  and  that  such  officers  cooperate  in  every  respect 
with  the  Bureau,  to  the  end  that  there  may  be  established  uniformity  of  municipal  reports 
throughout  the  country. 

Be  it  further  resolved,  That  in  the  opinion  of  the  conference  it  is  advisable  for  city  councils 
to  pass  their  appropriation  bills  or  "budgets"  in  the  form  herewith  submitted  by  this 
committee  and  indorsed  by  the  Census  Bureau,  so  far  as  practicable  under  the  requirements 
of  the  law  in  each  city;  it  being  evident  to  the  conference  that  if  appropriation  bills  are 
thus  drawn  and  passed  in  the  standard  form,  the  subsequent  work  of  comptrollers  or 
auditors  throughout  the  year  will  be  greatly  simplified  and  brought  into  close  alignment 
with  the  standard  schedules.  The  production  of  annual  reports  in  accordance  with  the 
standard  forms  here  recommended  must  then  necessarily  follow. 

Be  it  further  resolved,  That  it  is  the  sense  of  this  conference  that  to  secure  the  results  set 
forth  in  the  foregoing  resolutions  it  is  desirable  to  hold  annual  conferences  of  auditors, 


UNIFORM    MUNICIPAL   ACCOUNTING.  109 

comptrollers,  and  other  accounting  or  fiscal  officers  of  cities,  counties,  or  states  in  central 
localities  in  the  United  States,  for  the  purpose  of  discussing  uniform  methods  of  accounting 
and  reporting  and  such  other  matters  as  may  be  germane  to  these  questions.  When  such 
meetings  are  held  it  is  the  wish  of  this  conference  that  the  meetings  shall  be  addressed  by 
the  chief  statistician  or  other  official  of  the  Census  Bureau  upon  the  subject  of  uniformity 
in  municipal  accounts  and  reports.  Through  such  agency  there  will  be  secured  such  coop- 
eration of  officers  as  will  greatly  aid  and  assist  in  bringing  to  all  cities  and  to  other  corporate 
bodies  the  benefits  that  must  necessarily  follow  the  adoption  of  a  uniform  system  of  reports 
and  so  far  as  possible  of  accounts. 
Respectfully  submitted. 

HARVEY  S.  CHASE,  Chairman, 
HARRY  B.  HENDERSON,  Secretary, 
H.  L.  AUSTIN, 
Louis  BETZ, 
W.  McV.  EVANS, 
WILLET  B.  GANO, 
JOSEPH  F.  TRACY, 
WALTER  J.  SHEPARD, 
WALTER  M.  TYSON, 

Committee. 

Mr.  HENDERSON.  I  move  the  adoption  of  the  recommendations 
and  resolutions  as  read. 

The  CHAIRMAN.  Do  I  hear  the  motion  seconded? 

Mr.  BECK.  I  second  the  motion. 

The  CHAIRMAN.  Is  there  any  comment  or  discussion? 

Mr.  HENDERSON.  I  sincerely  hope  that  this  conference  will  not 
pass  by  the  recommendations  and  the  resolutions  that  have  been 
offered  without  discussing,  in  part  at  least,  the  last  resolution  offered, 
namely,  that  recommending  a  conference  to  be  held  in  various  sec- 
tions of  the  United  States  for  the  purpose  of  discussing  uniform 
methods  of  accounting  and  reporting  and  such  other  matters  as  may 
be  germane  to  these  questions.  I  am  confident  that  through  such 
conferences,  or  the  agencies  that  will  be  established  by  such  confer- 
ences, great  good  must  necessarily  follow.  Moreover,  there  will  be 
rapid  strides  in  arriving  at  uniform  methods  of  accounting  and  pre- 
paring annual  reports.  I  am  convinced  that  this  is  a  solution  of 
what  has  been  a  vexatious  problem.  I  am  advised  that  if  such 
conferences  shall  be  held,  the  Census  Bureau  will  cooperate  in  every 
way  possible.  The  advantages  of  such  cooperation  are  obvious. 
This  matter  has  been  suggested  to  the  Census  Bureau  while  this  con- 
ference has  been  in  session,  and  it  has  signified  its  willingness  to 
cooperate  in  the  holding  of  such  conventions.  If  these  resolutions  are 
adopted,  great  advantages  will  result  to  the  accounting  system,  not 
only  of  the  municipalities  but  to  those  of  the  states  and  counties  as 
weU. 

Mr.  AUSTIN.  I  don't  want  to  say  anything  at  length  upon  this  sub- 
ject, but  I  wish  to  call  attention  to  the  fact  that  during  the  past  year 
the  state  of  New  York  has  passed  a  law  requiring  uniform  reports 


110  UNIFORM    MUNICIPAL    ACCOUNTING. 

in  various  classes  of  municipalities.  Those  classes  are  of  various 
kinds — including  villages  having  a  population  of  over  three  thousand 
inhabitants,  and  also  the  second  and  third  classes  which  include 
every  city  in  the  state  of  New  York,  except  New  York  city  and  Buf- 
falo. It  is  our  purpose  and  our  fervent  desire  to  cooperate  with  the 
Census  Bureau  and  to  work  along  the  lines  laid  down  by  it.  The  act 
became  a  law  by  the  governor's  signature  only  last  June.  We  are 
now  working  upon  the  schedules.  We  began  with  the  villages, 
because  we  knew  that  the  cities  were  all  covered  to  a  certain  extent 
by  the  Census  Bureau.  We  have  since  taken  up  the  smaller  cities. 
This  was  done  at  the  instance  of  Mr.  Metz,  the  comptroller  of  the 
city  of  New  York,  and  let  me  say  that  as  regards  this  movement  the 
Census  has  no  better  friend.  As  soon  as  we  get  reports  from  the 
various  municipal  bodies  for  the  year  ending  December  31,  1905, 
it  is  the  purpose  of  the  comptroller  to  call  a  conference  of  the  fiscal 
officers  of  such  municipalities  in  the  state  of  New  York,  which  will 
be  along  the  lines  of  the  conference  which  you  have  called  here,  and 
endeavor  to  get  to  working  in  cooperation  with,  our  department,  and 
to  make  uniform  municipal  statistics  within  the  state  of  New  York. 

Mr.  BECK.  Following  Mr.  Austin's  statement  respecting  reports 
of  New. York,  I  would  like  to  say  that  next  week  a  convention  of 
Michigan  comptrollers,  treasurers,  and  other  fiscal  officers  will  be 
held  at  Grand  Rapids  for  the  purpose  of  securing  from  our  state 
legislature  a  law  similar  to  those  now  in  force  in  the  states  of  New 
York,  Ohio,  and  Wyoming.  I  sincerely  trust  that  we  shall  be  able 
to  secure  the  passage  of  such  a  bill.  It  has  the  hearty  indorsement 
of  nearly  every  one  in  the  state  who  has  given  the  matter  any  thought 
or  consideration.  If  the  law  is  passed,  we  will  endeavor  to  cooperate 
with  the  Census  Bureau  and  use  our  best  efforts  to  put  municipal 
statistics  on  a  uniform  basis. 

Mr.  RIVES.  Mr.  Chairman,  I  would  like  to  ask  what  sized  cities  are 
included  in  Bulletin  20  ?  In  our  state,  if  such  conventions  were  held, 
we  might  possibly  be  left  out,  as  we  do  not  come  within  the  30,000- 
inhabitant  list. 

The  CHAIRMAN.  We  are  having  a  bulletin  prepared  that  covers 
your  town;  that  is,  it  covers  towns  of  from  8,000  to  25,000  inhab- 
itants. 

Mr.  RIVES.  That  is  all  right,  Mr.  Chairman.  I  was  just  wondering 
whether  or  not  we  would  be  included.  You  see,  we  have  a  great  many 
little  cities  down  there.  I  did  not  know  what  sized  cities  you  had 
embraced  in  your  inquiry.  Now,  I  shall  take  great  pleasure  in  doing 
what  I  can  toward  furthering  in  every  way  possible  the  movement 
to  assist  the  Census  Office. 

The  CHAIRMAN.  I  will  state  in  further  explanation,  for  Mr.  Rives's 
benefit,  that  this  is  the  general  proposition :  The  Census  is  authorized 


UNIFORM    MUNICIPAL    ACCOUNTING.  Ill 

to  make  a  decennial  exhibit  of  the  finances  of  cities  of  all  sizes.  Then 
there  is  a  special  law  that  authorizes  us  to  take  statistics  of  cities  of 
30,000  inhabitants  and  over  annually.  These  statistics  that  I  am 
speaking  of,  including  369  cities,  are  for  cities  of  8,000  to  20,000  people. 
They  will  be  published  in  a  separate  bulletin  covering  the  ground, 
not  in  as  large  detail  but  along  the  same  specified  lines  as  Bulletin 
20.  Thers  will  be  other  bulletins  that  will  give  the  statistics  of 
county  organizations  and  other  civil  divisions. 

Mr.  WILLIAMS.  I  suggested  to  Mr.  Henderson  that  in  holding  con- 
ferences in  different  parts  of  the  country,  especially  in  our  own,  a 
person  gets  good  ideas  from  these  western  men.  I  think  it  will  be 
advisable  to  hold  them  annually,  so  that  we  may  come  in  contact  with 
the  western  men  and  get  the  benefit  of  their  ideas.  It  will  help  us 
materially  in  perfecting  our  reports. 

Mr.  RIVES.  I  heartily  indorse  what  the  gentleman  from  Rochester 
says.  I  have  gathered  a  great  deal  from  these  western  men,  and 
would  say  that  I  would  like  to  have  these  conferences  held  biennially. 
In  our  neighborhood,  in  the  southern  country,  the  ideas  of  a  few  of 
these  western  men  would  be  of  advantage  to  us. 

Mr.  PRATT.  I  can  not  let  this  conference  pass  without  saying  some- 
thing. I  did  not  intend  to  say  much;  I  came  to  listen.  Two  years 
and  three  months  ago,  when  we  had  our  last  conference,  the  city 
of  Lincoln,  Xebr.,  was  represented.  At  that  time  we  had  no  system 
of  bookkeeping  whatever  in  our  city,  but  since  then  we  have  adopted 
a  system  that  we  believe  is  very  good  indeed.  I  have  a  few  of  our 
reports  here.  Two  have  been  sent  to  Mr.  Powers,  and  I  believe  he  is 
well  pleased  with  them.  I  think  Mr.  Henderson  has  struck  the  key- 
note for  success  in  this  resolution  in  which  he  asks  auditors,  comp- 
trollers, and  other  fiscal' officers  of  cities  to  get  together  in  central 
localities  throughout  the  United  States  and  talk  over  this  matter  of 
uniform  accounting.  Had  we  not  been  represented  here  two  years 
agOy  we  should  now  be  in  the  same  hole  that  we  were  before. 

I  have  a  little  story  to  tell  which  is  not  of  very  vital  importance, 
but  which  has  some  bearing  upon  the  subject,  and  when  I  have  fin- 
ished you  will  understand  the  meaning.  There  was  a  man  who  died 
in  a  small  place  in  Illinois.  The  town  was  not  in  possession  of  a 
cemetery.  A  committee  was  thereupon  appointed  to  take  some 
action.  They  went  out  and  secured  a  site  for  a  cemetery.  Then 
came  the  query,  What  inscription  should  be  placed  over  the  portal  ? 
The  word  "Welcome"  was  suggested,  but,  after  a  little  discussion 
objection  was  made  to  that  word.  The  committee  went  out,  then 
came  back  and  reported  as  follows:  "Mr.  Chairman  and  gentlemen, 
an  objection  having  been  raised  to  the  word  'Welcome'  being  placed 
over  the  gate  at  the  entrance  of  the  cemetery,  we  have  changed  it  so 

27311—06 8 


112  UNIFORM    MUNICIPAL    ACCOUNTING. 

as  to  read  as  follows:  'We  have  come  to  stay.' '  So,  Mr.  Chairman, 
I  hope  this  convention  has  come  to  stay. 

Mr.  WILSON.  The  strongest  argument  in  favor  of  the  recommenda- 
tion made  by  the  committee  is  the  fact  that  on  the  floor  of  this  con- 
ference there  are  but  three  representatives  from  west  of  the  Missis- 
sippi river;  that  is,  only  three  states  are  represented.  There  are  two 
delegates  from  Colorado,  one  from  Wyoming,  and  one  from  Nebraska. 
We  do  not  consider  St.  Paul  west  of  the  Mississippi.  She  is  in  so  close 
touch  with  the  commercial  cities  of  the  world  that  we  do  not  recog- 
nize her  as  being  as  far  west  as  that.  From  the  South,  I  believe,  there 
are  but  four — that  is,  south  of  this  city.  They  have  not  been  as 
largely  represented  as  the  Eastern  states,  and  I  believe  that  if  we 
had  the  annual  conference  at  a  more  central  place,  we  should  have 
representatives  from  all  sections. 

Doctor  HART  WELL.  There  appear  to  be  forty-eight  names  on  this 
register,  and  I  have  an  anxious  feeling  that  some  of  the  gentlemen 
who  have  been  in  attendance  here  have  failed  to  place  their  names  on 
the  register.  As  they  are  entitled  to  inscribe  their  names  as  delegates 
and  members  of  the  conference,  I  hope  they  will  take  the  opportunity 
of  doing  so  before  they  leave  to-night,  in  order  that  we  may  have  a 
complete  list  to  print  in  the  proceedings. 

Mr.  CHASE.  The  motion  was  made  that  the  report  of  the  resolu- 
tions made  by  the  committee  be  adopted.  I  have  listened  quite 
carefully,  but  do  not  think  the  motion  has  been  seconded. 

The  CHAIRMAN.  The  motion  has  been  discussed  concerning  the  last 
section  of  the  resolutions,  as  to  the  holding  of  conferences  in  central 
locations,  and  the  request  was  made  by  the  committee  that  that  be 
discussed,  and  all  the  discussion  so  far  has  been  with  reference  to  that 
particular  feature. 

Mr.  MAC!NNES.  That  part  of  the  report  has  been  disposed  of,  but 
the  rest  of  it  has  not  been  discussed  at  all. 

Mr.  REX.  I  think  that  our  city  is  a  trifle  ahead  of  some  others,  from 
the  fact  that  to-day  we  believe  we  are  on  as  sound  a  basis  as  the  Census 
Bureau  desires.  At  the  present  time  we  have  an  ordinance  which 
requires  the  auditor  to  keep  his  books  in  accordance  with  the  desires 
of  the  Census  Bureau.  Regarding  the  sectional  meetings,  I  think 
the  plan  a  very  good  one  indeed,  and  I  trust  the  Census  Bureau  will 
see  its  way  clear  to  carry  out  the  scheme  outlined  by  the  committee. 

Mr.  MAC!NNES.  Mr.  Chairman,  in  regard  to  the  report  submitted 
by  the  committee,  suggesting  certain  changes  in  the  schedules,  as 
arranged  by  the  Census  Bureau,  I  wish  to  say  a  word  or  two.  The 
committee  suggests  that  " sanitation"  be  divorced  from  " highways;" 
that  they  be  separated.  I  think  that  the  committee,  or  this  confer- 
ence, should  go  further  and  discriminate  between  "public  health" 


UNIFORM    MUNICIPAL   ACCOUNTING.  113 

and  "  sanitation."  I  believe  that  the  Census  Bureau  classification 
should  stand  "public "safety,"  including  only  that  which  in  the  great 
popular  mind  for  centuries  has  been  understood  as  coming  under  that 
head.  Our  police,  our  fire  protection,  our  militia,  practically  cover 
all  that  you  have  within  the  purview  of  "  public  safety."  Of  course 
the  police  magistrates'  courts  are  part  of  the  police.  Then,  as  to 
charities  and  corrections:  It  seems  to  me  that  coupling  charities  and 
corrections  in  a  statement  uttered  by  a  municipality  indicates  that 
there  is  still  with  us  a  relic  of  barbarous  times,  when  the  poor  vagrants 
were  classed  among  the  malefactors. 

Looking  at  the  schedules  again,  Mr.  Chairman,  the  committee  seek 
to  limit  the  public  debt  statements  to  fewer  headings.  We  take  your 
classification  and  set  out  public  debts,  revenue  debts,  special  assess- 
ments, judgments  for  prior  years,  and  miscellaneous.  Now,  all  debts 
are  revenue  debts,  because  they  must  all  be  paid  out  of  revenue;  and 
so  it  seems  to  me  that  you  should  call  them  current  revenue  debts. 
If  you  say  current  revenue  debts  alone,  Mr.  Chairman,  you  would  not 
be  able  to  classify  the  debt  of  the  city  of  New  York  under  this  pre- 
scribed classification.  We  have  a  funded  debt;  we  have  a  current 
revenue  debt;  we  have  a  special  revenue  debt;  that  debt  which  is 
deferred  until  next  year;  and  current  revenue  debt  that  is  immedi- 
ately payable.  Looking  at  it  from  the  standpoint  of  our  city,  you 
would  require  to  have  another  classification  in  there.  I  call  atten- 
tion to  this  because  we  wish  to  have  this  form,  and  the  Census  Bureau 
wishes  to  classify  comparably  all  the  debt  statements,  as  far  as  they 
are  able. 

Doctor  CLEVELAND.  There  is  one  point  to  which  I  want  to  call  the 
attention  of  our  friend.  It  is  one  that  has  been  raised  many  times, 
and  is  not  a  theoretical  question,  but  an  institutional  one.  In  some 
cases  you  have  charities  and  corrections  combined,  and  in  others  you 
have  charities  and  hospitals  combined,  and  in  another  case  you  have 
another  combination.  It  is  an  institutional  one  and  not  theoretical. 
The  question  is,  how  can  that  be  solved?  The  Census  Bureau  is  per- 
haps more  capable  than  others,  as  it  comes  in  contact  with  the 
institutional  facts.  I  wish  to  call  attention  to  some  of  the  institu- 
tional facts  that  the  Census  Bureau  has  come  in  contact  with,  a 
few  of  which  they  have  put  in  the  wrong  place — that  is  courts,  under 
public  safety,  protection  of  life,  health,  and  property.  We  have  here 
all  kinds  of  courts :  Municipal  courts,  probate  courts,  coroner's  courts, 
superior  courts,  etc.  The  courts  that  we  meet  are  very  largely  civil, 
as  well  as  criminal.  Now,  to  say  that  a  civil  court  should  be  put  with 
a  police  department  is  no  more  logical  than  to  say  that  the  mayor 
or  city  council  should  be  there. 

Mr.  MAC!NNES.  I  said  the  police  magistrates'  courts. 


114  UNIFORM    MUNICIPAL    ACCOUNTING. 

Doctor  CLEVELAND.  I  was  speaking  of  the  Census  classificat  ion 
and  not  criticizing  your  remarks. 

Mr.  MAC!NNES.  Excuse  me.  I  thought  you  were  attempting  to 
punctuate  my  remarks. 

Doctor  CLEVELAND.  I  will  punctuate  them  and  send  you  a  copy. 
Mr.  Chairman,  it  seems  to  me  that  this  goes  more  properly  under 
general  administration  than  it  does  under  public  safety.  It  belongs 
with  the  executive.  The  legislative  and  the  judiciary  come  here 
together,  on  account  of  the  great  diversity  of  practice.  It  tends  to 
throw  out  of  joint  all  that  are  classed  as  public  safety,  and  I  believe  it 
would  be  better  treated  in  that  other  relation.  There  is  another  rea- 
son for  it,  and  that  is  also  institutional  and  not  theoretical.  That 
is,  as  explained  by  the  chairman  himself,  that  in  many  of  the  small 
cities  the  mayor's  is  the  only  court  in  the  city;  and  therefore  it  must 
be  put  there.  It  seems  to  me  there  are  many  advantages  by  putting 
the  legislative  and  judiciary  up  there;  that  the  law  officers  are  as 
much  for  protection  and  public  safety  as  the  magistrate  is.  There 
is  positive  advantage  to  be  gained  by  putting  that  there  instead  of 
treating  it  with  fire,  police  patrol  stations,  etc. 

The  CHAIRMAN.  Is  there  any  further  discussion  of  the  subject? 
If  not,  I  will  put  the  motion.  All  those  in  favor  of  the  acceptance 
and  the  adoption  of  the  resolutions  as  presented  will  signify  the  same 
by  saying  "Aye;"  contrary,  "No."  The  motion  prevails;  the  reso- 
lutions are  accepted  and  adopted.  Have  we  any  other  committee 
reports  at  this  time? 

Mr.  MAC!NNES.  Mr.  Chairman,  the- committee  to  which  was  referred 
the  schedules  submitted  by  Mr.  Chase  this  afternoon  wishes  to  report. 
The  schedules  submitted  by  Mr.  Chase,  to  provide  for  a  standard  form 
of  uniform  reports  for  municipal  indusfries  and  public  service  corpo- 
rations, classifying  the  revenue  and  expense  of  such,  have  been  consid- 
ered by  your  committee**which  hfcsfamended  these  schedules  and  now 
submits  to  you  a  resume  of  comments  which  it  has  made;  and  I  might 
say  that  the  changes  which  it  recommends  are  the  result  of  careful 
consideration  by  the  committee,  and  of  its  unanimous  conclusions 
on  tlyg  different  subjects  touched  upon. 

Mr.  Chairman,  I  wish  to  thank  Mr.  Momsen  and  his  staff  for  having 
furnished  us  with  very  clean  and  excellent  copies  of  our  work  as 
amended. 

(Mr.  Maclnnes  explained  at  length  the  amendments  made  by  the 
committee  in  the  schedules  referred  to  it.  After  considerable  inter- 
locutory discussion,  the  chairman  put  the  motion  to  accept  the  report 
of  the  committee  and  to  adopt  the  schedules  as  printed  below.  The 
motion  was  passed  and  the  schedules  adopted.) 


UNIFORM    MUNICIPAL    ACCOUNTING.  115 

Schedules  for  standard  and  uniform  reports  for  municipal  industries  and  public  service 

corporations. 

Adopted  hy  the  Conference  on  Uniform  Municipal  Accounting,  called  by  the  United  States  Census 
Bureau,  Washington,  D.  C.,  February  13  and  14,  1906. 


REVENUE  AND  EXPENSE. 
(Income  and  expenditure.) 

[a]  REVENUE. 

Sales  of  product  (water,  electricity,  gas,  etc.) $ 

Less  rebates,  refunds,  discounts,  etc 

X i ' t  proceeds  from  sale  of  product 

[b]  EXPENSE. 

1.  Expense  of  manufacture  (or  "supply"  for  water) $ 

(M.  o.)  Operation  (running  expense) 

:  M.  in. ;  Maintenance  (repairs  and  supplies) '. 

'2.  K  xpense  of  distribution 

(D.  o.)  Operation  (running  expense) .' 

(D.  m.)  Maintenance  (repairs  and  supplies) 

3.  ( ieneral  expense 

Not  including  taxes,  insurance,  damages,  guaranty,  depreciation,  dividends, 
interest,  or  sinking  funds. 


Total  "  expense  " 

Proceeds,  less  expense 

[c]  CHARGES  AGAINST  REVENUE. 

Taxes $ 

Franchise  payments 

Insurance  (fire,  accident,  and  fiduciary) 

Damages  (extraordinary  losses,  legal  and  other  expenses) 

Guaranty  (against  shrinkage  of  current  assets) 

Depreciation  (against  shrinkage  of  capital  assets) 


Total  "  charges  against  revenue  " 

Net  revenue  (proceeds,  less  expenses  and  revenue  charges) . 


[d]  APPLICATION  OF  NET  REVENUE. 

Dividends $ 

I  n  t  <•  res  t  (net) 

Sinking  funds 

Amortization  of  franchises 

Total  "  application  of  net  revenue  " 

Surplus  (or  deficit)  from  sales  of  product 

[e]  REVENUE  FROM  OTHER  SOURCES. 

Surplus  (or  deficit) ,  current  year 

Surplus  (or  deficit)  from  prior  years 

Total  surplus  (or  deficit)  at  close  of  current  year 


The  CHAIRMAN.  I  am  requested  to  state  that  immediately  at  the 
close  of  the  formal  meeting  of  this  conference  there  will  be  a  meeting 
of  the  fiscal  officers. 

Shall  we  take  up  for  a  few  moments  before  adjourning  the  other 
subject  that  was  on  the  programme — that  of  revenue  accounts,  as 
illustrated  by  one  or  two  of  the  cities  like  Pawtucket,  R.  I.  ?  Is  Mr. 
Rex  here?  Perhaps  he  is  ready  to  present  this  matter  briefly.  I 


116  UNIFORM    MUNICIPAL    ACCOUNTING. 

will  call  attention  to  the  fact  that  we  have  a  number  of  these  reports 
in  the  back  of  the  room,  together  with  the  report  of  Mr.  Chase  with 
reference  thereto,  but  it  may  be  a  little  late  for  the  discussion  that 
was  desired  for  this  and  was  contemplated  at  the  outset.  Some  of 
these  reports  will  be  passed  through  the  room  if  you  desire. 

Mr.  REX.  The  purpose  of  this  Pawtucket  report  is  to  get  in  line 
with  the  Census  Bureau,  and  to  be  in  a  position  where  we  can  make 
comparison  of  costs  of  running  the  different  departments  of  other 
cities  of  practically  the  same  size.  The  reports  are  here  and  I  think 
quite  a  number  of  the  members  of  this  convention  have  looked  them 
over,  and  I  will  say,  so  far  as  the  report  of  the  committee  on  reso- 
lutions, this  evening,  is  concerned,  that  this  report  is  practically  on 
the  same  lines  as  the  schedules  just  adopted.  Perhaps  it  goes  a  little 
further.  You  will  see  that  we  have  followed  the  same  lines  the 
Census  Bureau  sets  forth  in  practically  all  of  the  classifications.  If 
there  are  any  questions  which  any  member  of  the  convention  desires 
to  ask  me,  I  will  be  only  too  happy  to  answer;  but  to  go  into  a  full 
explanation  of  the  entire  report,  and  to  show  how  conclusions  were 
arrived  at,  will  take  more  time  than  I  think  this  conference  ought  to 
devote  to  it. 

I  will  say  that  already  I  have  prepared  schedules  to  be  placed  in 
book  form  which  will  lead  up  to  this  conclusion,  and  it  will  be  kept 
and  retained  at  the  time  the  audits  are  made,  and  at  the  time  the 
different  receipts  are  reported  through  the  office.  I  will  say  further, 
that  we  have  adopted  recently  an  ordinance  which  requires  the 
auditor  of  the  city  to  keep  his  accounts  in  accordance  with  the  recom- 
mendations, rules,  and  desires  of  the  Census  Bureau,  and  to  make  his 
report  to  the  citizens  on  that  line.  This  ordinance,  I  take  from  my 
conversation  with  quite  a  number  of  the  members  of  this  conference, 
will  be  of  material  assistance  in  quite  a  number  of  instances.  For 
example :  One  member  of  the  conference  stated  to  me  to-night  that  a 
very  great  difficulty  he  had  was  not  in  receiving  the  daily  receipts 
from  the  Treasury  Department,  but  having  those  receipts  present  in 
a  classified  form.  The  ordinance  to  which  I  refer  requires  that  very 
thing.  Now,  that  is  simply  one  point  that  one  member  brought  up. 
There  may  be  other  points  which  will  strike  other  members  and,  as  I 
say,  I  have  already  prepared  some  schedules  which  can  be  used  in  the 
office  from  day  to  day.  As  I  said  before,  to  go  into  it  with  very  much 
detail  would  require  too  much  time,  but  if  there  are  any  questions,  I 
will  be  only  too  glad  to  answer  them. 

The  CHAIRMAN.  If  any  are  interested  in  the  general  subject,  I  will 
say  that  there  are  lying  upon  the  desk  here  some  dozen  reports  of  the 
city  of  Minneapolis  that  contain  a  balance  sheet  to  which  our  friend, 
Mr.  Maclnnes,  took  exception,  and  if  you  have  not  seen  them  and 
would  like  to,  you  may  take  these  reports  until  they  are  exhausted. 


UNIFORM    MUNICIPAL   ACCOUNTING.  Il7 

Is  there  any  further  discussion  of  this  or  any  other  subject  to  bring 
before  the  conference  ? 

Mr.  AUSTIN.  I  would  like  to  ask  Mr.  Maclnnes  a  question.  I  want 
to  say  that  the  logic  of  his  paper  appeals  to  me  very  strongly,  but,  as 
I  recollect  it,  the  people  of  the  state  of  New  York  at  the  last  general 
election  passed  an  amendment  to  the  constitution.  As  Mr.  Maclnnes 
states,  the  general  rule  of  the  debt  limit  in  the  state  of  New  York  is 
10  per  cent  of  the  assessed  valuation,  but  with  this  constitutional 
amendment  they  passed  a  constitutional  amendment  which  ex- 
empted from  that  10  per  cent  limitation  the  capacity  of  the  city  of 
New  York  to  borrow  money,  I  think,  for  the  purpose  of  giving  it  power 
to  extend  its  water  supply.  Is  that  so,  Mr.  Maclnnes? 

Mr.  MAC!NNES.  Yes,  sir. 

Mr.  AUSTIN.  As  I  understand  it,  there  is  now  no  limit  upon  the  city 
of  New  York  other  than  the  fact  that  it  may  not  be  able  to  borrow 
more  than  is  safe. 

Mr.  MAC  INXES.  For  the  water  system. 

Mr.  AUSTIN.  The  assets  of  the  city  of  New  York,  according  to  Mr. 
Maclnnes,  are  10  per  cent  of  the  valuation  of  real  estate,  plus  what- 
ever it  may  be  able  to  borrow.  Is  that  so  ? 

Mr.  MAC!NNES.  All  water  bonds  of  the  city  of  New  York  issued 
subsequently  to  the  1st  day  of  January,  1906,  will  be  exempt  or  fall 
without  the  pale  of  the  10  per  cent  limit.  It  would  not  alter  one 
iota  the  principle  enunciated  in  the  balance  sheet.  It  would  simply 
mean  this:  If  your  bonded  debt  were  $600,000,000,  and  you  had,  as 
we  have  to-day  (I  am  speaking  in  round  figures),  $175,000,000  of  that 
in  your  sinking  fund,  and  in  addition  there  were  $10,000,000  of  the 
water  bonds  issued  after  the  1st  of  January,  they  would  simply  be 
deducted  from  the  total  net  bonded  debt,  the  same  as  our  sinking  fund 
holdings  are  now.  If  you  had  $600,000,000  of  the  debt  and  had 
$180,000,000  of  that  in  your  sinking  fund,  that  would  give  you  a  net 
debt  of  $420,000,000.  If  there  were  $10,000,000  of  the  bonds  issued 
subsequently  to  the  1st  of  January,  1906,  there  would  be.  a  further 
reduction,  making  you  a  net  debt  of  $410,000,000. 

Mr.  AUSTIN.  The  city  of  New  York,  then,  may  borrow  an  unlimited 
amount  for  water  extension — that  is,  its  assets  are  10  per  cent  of  its 
assessed  valuation  of  real  estate,  plus  an  unlimited  amount  for  water 
extension. 

Mr.  MAC!NNES.  Its  assets  are  10  per  cent  of  its  real  estate  subject 
to  taxation,  and  for  water  purposes  all  that  investors  are  willing  to 
loan. 

Mr.  AUSTIN.  That  is  it  exactly. 

Mr.  MAC!NNES.  How  can  you  determine  that  amount  for  your 
balance  sheet  ?  The  only  way  is  to  make  a  statement  of  facts  without 
indulging  in  speculation.  Every  million  dollars  you  issue  for  the 


118  UNIFORM    MUNICIPAL    ACCOUNTING. 

city  of  New  York  curtails  its  legal  right  to  borrow  for  anything  else, 
but  the  question  of  its  ability  to  borrow,  its  actual  ability  to  borrow, 
would  be  determined  by  the  lenders. 

Mr.  AUSTIN.  I  understand  that  very  well.  You  deduct  your  bonds 
issued  for  water  purposes,  and  you  say  you  would  place  on  the  one 
side  of  the  balance  sheet  10  per  cent  of  the  assessed  valuation  as 
assets  of  the  city.  Now,  is  there  something  in  addition  to  that  ? 

Mr.  MAC!NNES.  No  other  assets. 

Mr.  AUSTIN.  Yes;  but  you  have  additional  assets.  You  may  bor- 
row if  you  can. 

Mr.  MAC!NNES.  Your  additional  asset  is  shown  by  a  reduction  of 
your  liability.  This  liability  is  not  contracted  to  the  legal  borrowing 
capacity.  It  clearly  shows  at  once  that  in  addition  to  the  10  per  cent 
of  assessed  valuation  you  had  at  least  $10,000,000  for  water  purposes, 
and  if  you  could  acquire  $10,000,000  more,  it  proves  that  you  have 
$10,000,000  more  additional  value  of  credit,  but  you  can  not  place 
on  the  balance  sheet  any  speculative  value.  You  must  confine  your- 
self to  the  facts  in  the  case. 

Mr.  AUSTIN.  Certainly. 

Mr.  TKACY.  I  did  not  speak  of  all  the  peculiar  features  of  the  Ohio 
laws.  The  two  cities  of  Mansfield  and  Portsmouth  have  about  the 
same  population  and  the  same  duplicate  value,  or  the  same  restric- 
tions as  to  bonded  indebtedness,  which  is  not  a  constitutional  restric- 
tion but  a  statutory  one  which  the  legislature  may  change  next 
year,  and  it  is  proposed  to  raise  it  to  12  per  cent.  Besides,  the  people 
have  a  right  by  vote  to  increase  their  borrowing  capacity.  Taking 
the  two  cities,  Mansfield  and  Portsmouth,  having  the  same  population 
and  same  duplicate  value,  if  the  people  of  Portsmouth  are  assessed 
to  build  a  city  hall  costing  $50,000  or  $100,000,  and  they  are  bonded  to 
the  full  amount  of  their  limit,  they  can  go  before  the  people  and  raise 
that  limit.  Now,  would  you  hold  that  by  virtue  of  setting  up  an 
assessment  the  condition  of  Portsmouth  is  better  than  that  of  Mans- 
field ;  that  by  merely  the  people  voting  to  incur  more  indebtedness, 
that  city  is  in  a  better  financial  condition? 

Mr.  CHASE.  Take  the  condition  in  New  England.  Take  the  city 
of  Boston,  for  instance.  The  limit  in  the  state  of  Massachusetts  is 
2.5  per  cent  of  the  valuation,  as  determined  over  a  series  of  three 
years,  but  the  actual  debt  of  Boston  is  over  5  per  cent.  If  you  set  up 
that  limitation  and  set  up  the  actual  debts  on  the  other  side,  you  will 
have  a  deficit. 

Mr.  FROST.  Mr.  Chairman,  do  I  understand  Mr.  Maclnnes  to  say 
that  you  put  down  on  one  side  the  10  per  cent  as  the  amount  to  be 
legally  borrowed,  and  in  addition  to  that  you  put  down  only  bonds 
issued  since  1906? 


UNIFORM    MUNICIPAL   ACCOUNTING.  119 

Mr.  MAC!NNES.  No;  on  the  one  side  10  per  cent  was  assessed  upon 
the  taxable  value  of  real  estate  subject  to  taxation.  We  will  assume 
that  was  $600,000,000;  that  is  the  asset;  on  the  other  side  you  have 
a  total  bonded  debt  already  issued  of  $600,000,000,  of  which,  how- 
ever, the  sinking  fund  of  the  city  itself  holds  $180,000,000.  The  net 
debt,  then,  of  the  city  is  $420,000,000,  and  if  there  were  no  other  com- 
plications, its  legal  borrowing  capacity  would  be  the  difference  between 
the  net  bonded  debt  on  the  one  hand  and  10  per  cent  of  the  real  estate 
value  on  the  other.  If  we  assume  that  of  the  $600,000,000  there  were 
$10,000,000  of  water  bonds  issued  the  first  day  of  January  of  this 
year,  then  in  addition  to  total  bonded  debt  of  $600,000,000,  less 
$180,000,000  held  by  our  sinking  fund,  making  a  net  bonded  debt  of 
$420,000,000,  we  also  had  to  deduct  from  that  the  $10,000,000  of 
water  bonds  issued  since  January  1  under  the  provision  of  a  section  of 
the  constitution  which  eliminates  them  from  consideration  in  the 
bonded  debt,  that  would  raise  our  legal  capacity  to  borrow  $10,000,000 
more,  and  the  difference  between  $410,000,000  of  liabilities  on  the  one 
side  and  $600,000,000  of  assets  on  the  other  would  be  $190,000,000, 
and  that  would  be  our  legal  borrowing  capacity  at  this  time.  I  hope 
that  I  have  made  the  situation  clear. 

Mr.  BETZ.  Mr.  Chairman,  from  the  standpoint  of  a  city  comp- 
troller, not  an  accountant,  I  hold  that  the  duties  of  city  comptrollers 
are  to  make  reports  to  the  taxpayers  of  their  respective  cities  and  to 
make  them  in  such  a  concise  and  simple  way  that  all  can  understand. 
The  government  of  cities  is  of  a  paternal  nature,  simply  collecting 
money  from  its  citizens  and  expending  it  again.  A  commercial 
accountant  must  work  along  different  lines.  The  energies  of  a  cor- 
poration or  a  private  institution  are  all  directed  toward  making 
money.  In  other  words,  all  advances  made  in  commercial  accounting 
are  focused  on  the  profit  and  loss  account,  but  in  municipal  account- 
ing, there  being  no  profit  and  loss  account,  we  must  work  along  entirely 
different  lines,  and  for  that  reason  I  do  not  believe  in  the  usual  saying 
that  they  must  have  business  methods  in  public  offices,  for  I  believe 
there  is  more  necessity  for  us  to  have  public  methods  in  public  offices. 
I  therefore  think  that  all  expert  accountants  should  take  such  a  tack 
in  regard  to  making  up  new  forms  and  new  schedules  in  public 
accounting. 

Mr.  MAC!NNES.  I  wish  to  say  that  I  am  heartily  in  accord  with  all 
that  you  have  said.  I  am  glad  to  see  that  the  principle  advocated 
two  years  ago  is  beginning  to  bear  fruit.  The  municipalities  have 
not  entered  into  business  for  profit.  Therefore  they  are  entirely 
different  from  a  private  trust,  and  I  am  glad  to  see  that  they  lead  up 
to  entirely  different  conclusions.  It  is  an  entirely  different  corpora- 
tion from  that  of  a  trust,  and  I  am  glad  to  see  that  the  comptroller 
of  one  of  our  cities  realizes  the  truth. 


120  UNIFORM    MUNICIPAL   ACCOUNTING. 

Mr.  WILSON.  We  do  sell  things  once  in  a  while,  but  I  do  not  want 
to  get  into  a  discussion.  We  have  a  system  that  is  fairly  good. 

The  CHAIRMAN.  Is  there  any  further  discussion? 

Doctor  HARTWELL.  Lest  silence  should  be  interpreted  as  consent, 
I  want  to  say  a  few  words  as  to  the  terms  "  ordinary"  and  "  extraordi- 
nary." I  hold  that  they  are  very  good  terms,  having  been  developed 
out  of  the  fiscal  experience  of  European  states  and  cities  and  having 
been  used  in  the  French  official  reports,  for  instance,  for  at  least  sixty 
years.  The  reports  of  the  city  of  Paris  are  drawn  up  on  the  basis  of 
ordinary  and  extraordinary  receipts  and  expenditures  and  are 
required  by  public  law  to  be  so  drawn  up.  It  is  possible  to  cite  the 
legal  definitions  of  those  terms.  Again,  if  you  will  take  the  trouble 
to  study  the  accounts  of  Berlin,  you  will  find  the  same  terms  in  use. 
You  will  find  them  too  in  reports  of  quite  a  number  of  British  cities. 
Their  significance  and  use  are  discussed  at  length  and  with  great  skill 
and  acumen  by  Prof.  Adolf  Wagner  in  his  "Finanz  Wissenschaft." 
Those  who  use  them  are  in  very  good  company,  it  seems  to  me. 

Mr.  HENDERSON.  Mr.  Chairman,  before  this  meeting  adjourns  I 
would  like  to  say  to  the  gentlemen  who  are  present  that  we  came  here 
at  the  invitation  of  the  Government  through  the  Census  Bureau. 
We  have  met  with  the  officials  of  the  Census  Bureau  and  we  feel  that 
we  have  come  nearer  to  the  Census  Bureau  than  ever  before.  I 
believe  that  it  is  becoming  in  us  at  this  time  to  return  a  vote  of 
thanks  to  the  gentlemen  w^ho  called  this  meeting,  and  particularly  to 
the  gentleman  who  has  so  ably  and  so  fairly  and  so  untiringly  presided 
over  this  conference.  [Applause.]  I  make  this  as  a  motion. 

Mr.  MAC!NNES.  I  second  the  motion. 

Mr.  HENDERSON.  As  the  motion  has  been  seconded,  as  many  of  you 
who  favor  the  same  will  please  rise.  A  rising  vote,  if  you  please. 
[Prolonged  applause.] 

Mr.  Chairman,  I  have  the  honor  to  advise  you  that  the  motion  has 
been  carried  unanimously. 

The  CHAIRMAN.  Gentlemen,  I  hardly  know  how  to  express  the 
kindly  feeling  that  I  find  between  myself  and  all  the  fiscal  officers,  not 
only  those  present  but  those  of  other  cities.  As  I  said  at  the  opening 
of  my  remarks  with  reference  to  our  work,  it  would  have  been  impos- 
sible for  the  Census  Bureau  to  realize  the  success  it  has  attained  in  this 
field  without  the  active  cooperation,  the  kindly  sympathy,  and  the 
courteous  way  in  which  you  have  treated  not  only  the  head  of  our 
Office,  but  all  its  subordinates.  It  is  not  simply  the  cordiality  and 
kindly  feeling  that  you  have  expressed  for  them  that  I  am  grateful 
for,  personally,  and  wish  to  thank  you  for,  but  permit  me  again  to 
thank  you  still  more  heartily  for  the  kinder  and  more  valuable, 
because  continuous,  cooperation  and  kindness  and  courtesy  which 
have  sprung  up  in  connection  with  our  work,  with  your  work,  through- 
out the  cities  of  this  country.  May  the  work  you  are  engaged  in, 
and  I  am  now  engaged  in,  meet  the  hearty  approval  of  all.  May 


UNIFORM   MUNICIPAL   ACCOUNTING.  121 

you  be  largely  successful  therein  and  blessed  in  all  your  undertakings. 
I  thank  you.  I  wish  to  add  that  in  expressing  this  I  voice  the  senti- 
ments of  Director  North. 

Mr.  HENDERSON.  I  move  that  we  adjourn. 

Mr.  MAC!NNES.  Before  adjourning  I  should  like  to  express  to  you 
and  to  Mr.  Momsen  and  his  staff  my  personal  appreciation  of  their 
courtesies  and  many  kindnesses  to  us  during  the  conference.  I  wish 
through  you  to  thank  them  personally  and  to  express  my  apprecia- 
tion of  their  courtesy. 

Mr.  HENDERSON.  I  second  that  motion,  that  a  vote  of  thanks  be 
extended  to  the  corps  of  assistants. 

The  CHAIRMAN.  You  have  heard  the  motion.  All  in  favor  will 
signify  the  same  by  saying  "Aye;"  contrary,  "No."  The  motion 
prevails. 

Mr.  HENDERSON.  While  the  votes  of  thanks  are  going  around,  I  wish 
to  say  that  there  is  one  painstaking  official  of  this  conference  who 
has  not  yet  been  mentioned.  I  move  that  the  thanks  of  the  con- 
ference be  extended  to  the  secretary  for  the  able  performance  of  the 
duties  of  his  office,  and  to  add  that  we  wish  him  God  speed  on  his  way 
to  Boston. 

The  CHAIRMAN.  All  in  favor  will  signify  the  same  by  saying  "  Aye; " 
contrary,  "  No."  The  motion  prevails.  I  know  that  comes  from  the 
heart. 

Doctor  HARTWELL.  Mr.  Chairman  and  gentlemen,  I  am  very  much 
obliged  to  you  for  your  vote  of  thanks.  The  work  that  I  have  been 
doing  is  of  a  quiet  sort,  and  it  ill  becomes  me  in  this  hour,  after  the 
eloquent  remarks  made  by  the  presiding  officer,  to  attempt  to 
express  my  feelings;  but  I  have  to  thank  you  for  the  privilege  of 
wielding  a  "blue  pencil' '  at  no  distant  day.  I  feel  that  Mr.  Powers,  as 
chairman  of  this  conference,  will  be  able  to  publish  the  proceedings 
of  the  conference  much  more  promptly  than  was  the  case  two  years 
ago.  I  am  confident  that  the  well-arranged  and  w^ell-executed 
plans  of  Mr.  Momsen  and  his  staff  will  tend  to  reduce  the  work  of 
preparing  the  proceedings  many  fold. 

I  trust  that  I  shall  be  in  good  health  wThen  I  reach  Boston.  While 
it  is  true  that  Boston  is  said  to  be  not  a  locality,  but  a  state  of  mind, 
it  has  corporal  limits  which  I  hope  to  be  able  to  recognize  when  I  land 
there. 

The  CHAIRMAN.  I  will  now  put  the  motion  to  adjourn.  All  in 
favor  will  signify  the  same  by  saying  "Aye;"  contrary,  "No."  The 
motion  prevails. 

(The  conference  then  dissolved.) 

Attest: 

EDWARD  M.  HARTWELL,  Secretary. 

O 


OP  TH 
UNIVERSITY 

OF 


OVERDUE. 


